Efforts to expand California’s $100 million Film and TV Tax Credit Program took a bit of a dousing today from the state’s Legislative Analyst Office. While not explicitly recommending nor rejecting the current legislation that’s moving through the state Assembly, today’s report says that “if the Legislature wishes to continue or expand the film tax credit, we suggest that it do so cautiously.” The 24-page report from the non-partisan office also takes a bigger-picture view that cast the “flagship” movie and TV industry as but one of many in the state in possible need of assistance. “Instead of approaching economic policy on an industry-by-industry basis, the Legislature may take actions that encourage all businesses to stay or relocate to California, such as broad-based tax reduction or regulatory changes.”
The current program was introduced in 2009 in an effort to try to halt runaway production and lucrative challenges from states such as Georgia and Louisiana as well as Canadian provinces and countries like the UK.
Today’s LAO report expresses doubt about the overall economic benefits of tax credits for the film and TV industry and whether they actually pay for themselves. It also worries about the “data limitations” on research to gauge the decline of the industry in the state is and warns against a “race to the bottom” with other states in terms of providing competing subsidies. “If a film project was attracted to the state because of the tax credit, and would not have otherwise filmed in the state, the economic benefit of the film is calculated based on how its spending trickles through the economy — a phenomenon called the multiplier effect,” points out today’s report. “However, the existence of a multiplier effect does not imply that the subsidy generates economic gains that are greater than its costs.”
For foes of expanding the state’s Film and TV tax credit program, like the influential California Teachers Association and the California School Employees Association, and the powerful fence sitter known as Gov. Jerry Brown, today’s report undoubtedly offers new reserves of resistance. The current program is set to fully expire on July 1, 2017. While no dollar figure has been attached yet, the new bill before committees in Sacramento would extend the program to 2022 and open up eligibly to films with budgets over $75 million and network pilots.
Still the LAO’s report, titled “Film and Television Production: Overview of Motion Picture Industry and State Tax Credits”, does acknowledge that there is a problem, as many producers, execs, guilds and politicians have stressed. “California’s motion picture industry is not going to disappear overnight because of other jurisdictions’ subsidies, but there may be a long-term risk that California could lose a significant share of this flagship industry,” the report notes. In words that will give hope to many on the studio lots and in the state house offices, the report adds, “It is reasonable for the Legislature to want to take action to prevent this.”
Today’s analysis is intended for lawmakers in relation to the widely co-sponsored and industry-supported AB 1839 bill that was introduced on February 19. In response to today’s report, the co-authors of the proposed California’s Film and Television Job Creation Program bill tried to put on the best possible face. “The California Legislative Analyst’s Office issued a report that confirmed what independent economic analyses of California’s Film Tax program have found: that the program has merit,” Assemblymen Mike Gatto, D-Los Angeles, and Raul Bocanegra, D-Pacoima, said in a joint statement. “The report also confirmed that this flagship industry is at risk and that competition from other states and countries is both an aggressive and credible threat to California’s economy.”
Perhaps this all needs to be taken with a grain of salt. For one thing, the last time the LAO issued a report on Film and TV tax credit program back in 2012, it also offered gray skies. The politicians in Sacramento basically ignored that and passed new legislation. Gov. Brown then signed a two-year extension to the production incentive program on September 30, 2012, the last day possible.