Offshore outsourcing has become a state issue as well as a national one. California state Sen. Liz Figueroa held hearings in Sacramento on Tuesday to address outsourcing of state contracts and services that handle sensitive medical and financial information.

"Californians are at risk as more and more companies shift jobs to developing countries," Figueroa said in a statement. "As these technical jobs relocate in other countries, personal, financial, and medical data is threatened and becomes vulnerable to exploitation. Unfortunately, California's tough privacy laws do not apply overseas."

Figueroa is sponsoring a package of three bills to deal with outsourcing: SB 1451 will address the privacy risk when personal medical and financial information is shipped overseas. SB 1452 prohibits the outsourcing of state contracts outside the United States. And SB 1453 requires employers to notify state and affected employees when the company plans to outsource 20 or more jobs overseas.

But according to one IT industry interest group, some of the proposed regulations may do more harm than good.

Testifying at the hearing, Jeff Lande, senior VP of the IT services division at the Information Technology Association of America, an industry trade group, called SB 1452 counterproductive and said it would only encourage U.S. trading partners to adopt similar measures.

"No matter how difficult, we must lead by example in global markets," Lande said. "Several legislative attempts at the federal or state level have sought to create procurement requirements for domestically produced content or place limitations on the location of unclassified government work. Unfortunately, SB 1452 falls into this category."

In a telephone interview, ITAA president Harris Miller said the United States runs a large trade surplus in IT software services and suggested that such legislation will only encourage other countries to close their markets. "It's a sure way to get a trade war going," he said.

Miller said concern about jobs is misplaced. He says that while 1.5% to 2% of IT jobs have moved abroad, IT employment in the United States will also grow, thanks to demand for goods and services in emerging markets.