San Jose Mercury News, February 16, 2004 Monday  

Secrecy the word on outsourcing;
Tracking where jobs are going is very difficult

By KARL SCHOENBERGER, Mercury News

Food stamp recipients in California having trouble with their accounts no longer speak to customer service representatives within the state -- but they are not supposed to know that. Operators at call centers in India and Mexico, who work for a company that handles transactions in the state's food stamp program, are trained not to reveal their location.

This fog of private-sector confidentiality is at the center of an intensifying national debate over the exodus of white collar jobs to low-wage labor markets abroad. California lawmakers are trying to get a handle on how many state government services have been sent offshore by contractors. But the task is proving to be practically impossible.

Two bills that would ban offshore outsourcing of state services have been introduced in the state Assembly this year, and more are pending. Yet it is far from clear how such restrictions could be enforced, state officials and legislative sources say, because state agencies do not keep track of where the multitude of private contractors do their work.

California is only now building a computer database that could track the $6 billion in contracts it awards every year to the private sector for goods and services, said Rob Deignan, a spokesman for the General Services Department. But it won't have the capacity to monitor subcontracting services that might go overseas.

''The planet is shrinking very quickly,'' Deignan said. ''This is a global issue that probably should be looked at on the federal level.''

In addition to California, a dozen other states are considering anti-outsourcing legislation; bills at the state and federal levels would require call centers to disclose their locations. To shed light on the extent of California's involvement in outsourcing, state Sen. Liz Figueroa, D-Fremont, has scheduled a hearing March 9 before the Senate Select Committee on International Trade Policy titled: ''Outsourcing in California -- Our Jobs and Privacy at Risk.''

Figueroa said she hopes to hear testimony from state agencies that send work abroad, including the Health and Human Services Agency, and explore the issues of privacy and security.
 
Concerned residents

''A lot of California residents are concerned because they are paying taxes at the same time we are sending those jobs offshore,'' she said. ''I think if these people knew that their medical and welfare records were going overseas they'd be even more concerned.''

Figueroa is the author of 1999 Confidentiality of Medical Privacy Act, which protects the privacy of medical records in California. She said she was motivated to hold the hearing on outsourcing after reading about a worker in Pakistan who threatened to disclose confidential patient information from the University of California Medical Center in an employment dispute.

The state's use of offshore outsourcing came into focus after the introduction of Electronic Benefit Transfer (EBT) cards for food stamps and some welfare programs on a county-by-county basis over the past two years. Some welfare recipients realized their questions were being answered from overseas call centers, not California state and county agencies.

The new electronic cards, called the Golden State Advantage Card, allow welfare recipients to avoid the inconvenience -- and stigma -- of paper food stamps at grocery store cash registers, where they can use them just like ATM debit cards. If they have trouble with their accounts, they go to a client services hotline operated by a state government contractor that offers automated information. If they need to talk to a live person for help, their calls go to overseas subcontractors.

A Mercury News reporter phoned the state's EBT Customer Service line (877-328-9677) last week and got through to a young man who identified himself as ''Richard'' but would not reply when asked if he was in India. ''We deal with the Golden State Advantage Card, but I can't tell you if I'm in
California or not,'' Richard said in a lilting South Asian accent. Jazz music played as the call was put on hold, until his supervisor, ''Rachel,'' came on the line. She said she worked for ''Citicorp'' but was not authorized to say more.
 
Processing benefits

The welfare reform law passed by Congress in 1996 has radically changed the way states and counties across the country process welfare benefits. The U.S. Department of Agriculture has been out front with mandates to convert the old paper food stamps into electronic payments, and other welfare programs have followed suit.

In August 2001, California awarded a $441 million, 7-year contract with Chicago-based Citicorp Electronic Financial Services (acquired by JP Morgan in November for $380 million) to provide electronic transaction services for its food stamp and welfare programs. The state's share of the EBT contract is $109 million, while the federal government pays the remaining $332 million.

JP Morgan Electronic Financial Services and its subcontractors hold similar contracts in more than 30 other states, using a technology center in Tampa, Fla., to process some 50 million transactions a month, said company spokesman Brian Kibble-Smith. Nearly all customer service calls are handled by its automated voice mail system, he said, but callers requesting live help are transferred overseas -- to India for English speakers and to Mexico for Spanish speakers.

Unions representing U.S. telephone operators and call-center workers have been lobbying for state and federal ''consumers' right to know'' legislation that would require customer service and tech-help call centers to disclose their locations, ostensibly to discourage U.S. companies from moving such jobs overseas. Sen. John Kerry of Massachusetts, the front-runner for the Democratic presidential nomination, introduced a bill in Congress in November along those lines.
 
No easy answers

There are no easy answers to the question of how many state and county-level jobs will have been lost or moved offshore once the EBT program is in operation across the state in July. ''I don't believe anyone in the counties has lost a job yet because of the automation of the EBT services,'' said Rapone Anderson, a spokesman for the Health and Human Services Agency.

But in the current political atmosphere, where job security is one of the biggest concerns for Californians, the idea that state services jobs are being subcontracted to foreign countries -- and can't easily be tracked -- is highly controversial.

''It may be good business for JP Morgan, but it's hard to figure out how this is good for the people of
California,'' said Steve Trossman, an official with the California State Employees Association in Sacramento. ''What about the people getting these services? Many of them are getting food stamps or welfare payments because they can't find jobs. Does it make sense to send this work overseas?''