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Colorado considers ban on businesses that outsource Original Source Link: (May no longer be active)
http://www.usatoday.com/tech/news/techpolicy/2005-02-23-colo-outsource-bill_x.htmhttp://www.usatoday.com/tech/news/techpolicy/2005-02-23-colo-outsource-bill_x.htm
Colo. considers ban on businesses that outsource
By Colleen Slevin, Associated Press
DENVER — Unemployed since 2001, Diane Ziebarth doesn't pay much money in taxes but she wants to make sure the little she does contribute doesn't help push more Americans out of work.
She wants the state to stop doing business with companies that hire workers overseas rather than hire close to home. Critics of a bill — which was backed by a Senate committee Tuesday — say it could end up costing the state millions of dollars because so many companies now rely on the practice.
"I would like to see my dollars go at least for someone's wage in Colorado," said Ziebarth, who lives off her early retirement funds as she looks for a new technology job.
Sen. Deanna Hanna, D-Lakewood, said it doesn't make sense for Colorado to offer tax breaks and incentives to companies so that they move here while at the same time signing contracts with those that "offshore" their jobs.
The ban would apply only to services, not products, but opponents say the two are intertwined especially in technology.
For example, the state's main central computer processing unit is made by IBM but the company's main support services headquarters is in Asia.
Last year, 36 states considered legislation aimed at limiting offshoring but they became law in only two states — Tennessee and Illinois — according to the National Conference of State Legislatures. This year at least 15 states besides Colorado are considering such bills. A measure in South Dakota would bar companies that outsource from getting state aid. New Hampshire lawmakers are looking at keeping track of how many jobs are outsourced and not doing business with any companies that ship more than 50 jobs overseas.
U.S. Bank economist Tucker Hart Adams said offshoring is nothing new but has become an easy target lately because of all the jobs lost during the recession.
"It will cost the state in terms of jobs, creating a healthy economy, a good place to do business. Closed economies don't work," she said of the proposal.
However, economist Donald Holmstrom of the union-backed Front Range Economic Strategy Center, said Colorado lost 19,000 high tech jobs during the recession, which he believes were offshored. Hommstrom said many of the new jobs created since have been lower paying ones.
Heidi Heltzel of the Colorado Association of Business and Industry said the proposal could cause a wide range of problems, possibly preventing the state from importing Canadian lynx for its reintroduction program or running tourists advertisements abroad.
Richard Pennington, the director of the state's Division of Finance and Procurement, believes the state could end up having to buy new computers and software at a cost between $26 million and $75 million because Microsoft contracts some work overseas.
His estimate, which Hanna called "outrageous", was not included in the fiscal analysis prepared by legislative staffers. They calculated the bill would limit the number of companies competing for state business but concluded it wasn't clear how much it would cost the state overall.
The analysis does provide some examples of how the state relies on offshoring. The Secretary of State's office reported it saved $30,000 by subcontracting overseas workers to put all of the state's rules in an electronic format. The Department of Natural Resources said it would have paid 23% more on a printing contract if it had accepted a Colorado's company's bid over one from a Canadian firm.
John Coffey, who lost his $72,000-a-year IT job when IBM moved it to Canada, said he thinks big companies will change their practices to hold onto lucrative state contracts even if it costs them a little bit more to hire Americans. He's not as hopeful the practice will end soon in the rest of business.
"Companies will stop this when the American middle class is so decimated that they can't afford to buy the widgets that they're making," he said.
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Copyright 2005 The Associated Press.
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