Report: Offshoring Among States Widespread

NEW YORK – Until the practice began stirring controversy, 42 of 50 U.S. states used overseas call centers (search) to answer questions from food stamp recipients, according to a report by a union affiliate opposed to offshoring.

But it remains difficult to quantify states' broader reliance on overseas outsourcing, largely because governments are, themselves, uncertain where contractors do business, concludes the report, released Wednesday.

The report, commissioned by the Washington Alliance of Technology Workers (search), examines state governments' decisions to contract operations to firms that do the work overseas.

"State governments have no idea where their state tax dollars are being spent, whether it's down the block or across the globe, when they purchase IT (information technology) services," Marcus Courtney, president of WashTech, said in a conference call with reporters Wednesday.

The report highlights use of offshore call centers by state food stamp programs as one of the clearest and most widespread examples of overseas outsourcing.

The practice has aroused controversy in several states, leading New Jersey officials to bring its call center operations back to the United States. Five other states — Arizona, Kansas, North Carolina, Oregon and Wisconsin — plan to do so.

But 36 other states and the District of Columbia still use overseas call centers, the report found. Most of those states contract with firms that have call centers in India (search), with some also relying on call centers in Mexico to field questions from Spanish speakers.

The report's release was timed to shape discussion of offshoring at a meeting of the National Governors Association (search) that begins Friday in Seattle.

WashTech is the Seattle-based local of the Communications Workers of America union. The report was prepared by Good Jobs First, a group often allied with labor and environmental organizations, that scrutinizes government subsidies to businesses for the purpose of creating jobs.

Beyond the call center contracts it is difficult to assess the extent of state governments' reliance on foreign labor, the report says.

It catalogs $75 million in contracts about a dozen states have with 18 firms that specialize in offshore outsourcing, but researchers acknowledge that represents a very small fraction of state government contracts. The report also lists 30 states that have some or all of those firms on their approved lists of suppliers.

Courtney and Philip Mattera, research directors at Good Jobs First, said those findings hint at much larger, but largely untracked, use of overseas labor by states.

Lawmakers in at least 35 state legislatures have introduced bills to ban contracts with firms that would send the work overseas, or require more disclosure, said Justin Marks, a research analyst at the National Conference of State Legislatures. But most of the measures have made little headway, highlighting a difficult choice for states.

When states began embracing outsourcing about a decade ago, most expected private firms would perform government operations locally, Marks said. But many states failed to realize that outsourcing was becoming more globalized.

Now, with state governments facing budget crunches, states could be reluctant to abandon arrangements that save taxpayers money, he said.

"It just goes back to the simple argument: are states better sending these jobs out and saving money or keeping and creating more jobs in state government?" he said.