Forty-one states are contracting with companies that use workers in India to answer questions from U.S. welfare recipients about state food stamp programs and other benefits, according to the U.S. Department of Agriculture, which monitors the food stamp program.

States are also directly or indirectly hiring companies in Canada, Mexico and overseas for technology consulting, software programming and records processing — work that can be done with a computer from any corner of the world.

Of the $3.8 billion in technology spending states will outsource this year, nearly 5 percent will go offshore, according to Gartner Dataquest, which analyzes work force technology trends. Gartner projects that will double in two years.

Many states aren't sure how much of their residents' tax dollars are paying foreign workers' salaries. That's because the companies they hire may subcontract the work to other companies overseas.

Some legislatures and governors are asking state agencies to investigate how much work is being subcontracted overseas. A cursory review by Washington state found that 29 of 41 state agencies and higher education institutions had some work done out of the country since 2002.

The federal government also can't quantify how much of the work that it outsources to private contractors might be performed overseas. The General Accounting Office, the investigative arm of Congress, has just begun to study offshoring.

But with the loss of U.S. jobs to companies overseas a hot campaign issue, public officials are pressing to keep government work at home.

An amendment to the budget signed into law in January prevents U.S. companies that win new federal contracts from offshoring the work. The ban expires Sept. 30. Sen. Christopher Dodd, D-Conn., has proposed permanently preventing the use of federal taxpayer dollars to move government work overseas. He also wants to prohibit states from using federal money on contracts that employ overseas workers.

Lawmakers in at least 31 states have proposed banning contracts with companies that hire overseas workers, according to the National Conference of State Legislatures.

Last month, the governors of Michigan and Minnesota issued executive orders directing state procurement agencies to give preference to American, particularly in-state, vendors of goods and services. In a statement accompanying his order, Minnesota Gov. Tim Pawlenty said, "We need to encourage jobs in New Prague or New Ulm, not New Delhi."

But with budget deficits forcing states to raise taxes and fees or cut popular programs, the conflict over what is called "offshoring" comes down to this question: Should states be looking to save money or save jobs?

Some states saving jobs

Officials in at least two states decided it is worth spending more to keep jobs at home.

New Jersey officials learned in 2001 that the Arizona-based company eFunds they hired to run a food-stamp call center was moving the jobs from Wisconsin to India, where workers earn about three-quarters less. State lawmakers pressed to move the jobs at home. Now the eFunds call center for New Jersey is in economically depressed Camden, where it employs two managers and nine operators.

Extra cost to taxpayers: nearly $775,000 a year.

"Taxpayers would rather see their money be reinvested in the state of New Jersey or at least in the United States to put people to work who are unemployed even if it costs a little more money," said New Jersey state Sen. Shirley Turner. She is sponsoring legislation to stop the state from offshoring any more jobs.

North Carolina, which has lost nearly 50,000 jobs mostly in textiles and furniture manufacturing because of the North American Free Trade Agreement, also put its foot down on call center jobs.

Gov. Michael Easley recently approved moving a food-stamp call center from India to rural Martin County, where it will employ about 34 workers.

Extra cost to taxpayers: about $1 million a year.

"In this instance, looking at the facts of this situation, we could bring jobs to Martin County (and) we'd have more control over it," said Dan Gerlach, Easley's senior fiscal policy adviser. "We need jobs in our state."

Effort could backfire

But some economists say banning foreign contractors is asking for trouble because foreign countries might create similar barriers that would end up hurting the U.S. economy.

"We'll invite retaliation. It's naive to think that won't occur," said Joseph Seneca, a Rutgers University economist. "The larger benefits of trade that America has experienced in the form of a much wider selection of goods is ultimately at risk here."

The head of a trade association representing technology companies that use foreign workers derides the outcry as a "fortress America mentality."

States under the gun to deliver services efficiently have naturally turned to places that provide cheaper help, said Harris Miller, president of the Information Technology Association of America.

"Any procurement official has a responsibility to develop the best value for the taxpayers, assuming it doesn't hurt other state objectives," he said.

People already pay too much for government services, said Peter Sepp, a spokesman for the National Taxpayers Union, an advocacy group that supports lower taxes.

"If government was really concerned about keeping jobs here, the best way is to plow back the savings (from cheaper contracts) into tax relief for small businesses, which are more likely to create jobs," he said.

Opponents of offshoring say keeping jobs close to home has financial as well as social benefits.

Take what New Jersey did with its call center.

First, there's the federal, state and local taxes the Camden employees pay that wouldn't be paid by workers in India. Then there's the money they spend in the local economy on food, clothes, housing and other goods and services.

Plus, 11 people working at the Camden call center means 11 people not collecting unemployment benefits, food stamps or welfare.

"We also know what happens when people are unemployed. They take on anti-social behavior," said Turner, the New Jersey state senator. "They are more likely to be a drug addict or an alcoholic and commit spousal abuse or child abuse. And they are more likely to get incarcerated. That is a cost we need to factor in."

Misuse of private data worrisome

By Ledyard King
Gannett News Service

WASHINGTON — Critics of states that send government work abroad usually focus on the loss of American jobs, but they also are concerned about the potential misuse of personal information contained in state records.

Giving people abroad access to sensitive information, such as Social Security numbers, could lead to identity theft that could be very difficult for U.S. authorities to track down and prosecute.

In one case, such private information was used for blackmail.

The University of California- San Francisco Medical Center had a contract with an in-state company to transcribe the dictated notes of doctors and other healthcare providers.

The company, Transcription Stat, subcontracted the work to a Florida firm that then subcontracted it to a Texas outfit that ultimately hired someone in Pakistan to transcribe the notes, according to the university.

On Oct. 7, UCSF Medical Center received an e-mail from the Pakistani transcriber claiming that she had not been paid and threatening to publicize personal medical records. A partial payment was made the following day and the transcriber never circulated the information.

The medical center now must approve any subcontractor for transcription services.

According to the National Conference of State Legislatures, several states are considering bills that would prevent personal financial or medical records from being sent overseas for processing.

It's not worth the risk, said Alabama state Rep. Steve Hurst, who has introduced legislation banning state work from being performed abroad and prohibiting Social Security numbers from being included on almost all Alabama state documents.

"There's going to be a security problem if we keep doing what we're doing," Hurst said. "Why can't we spend the money here at home where we don't have to outsource our private information?"

Harris Miller, president of the trade group Information Technology Association of America, said overseas vendors are very careful about security.

How much of a problem can it be, he asked, if so many major companies use workers abroad for some of their sensitive work? Nobody complained, he said, when overseas programmers were hired to troubleshoot or rewrite computer programs at the turn of the millennium to head off any problems from the Y2K conversion.