Evidence is In: Tax Credits Work for CA Film Biz

Billie Greer
Public Policy Advisor, She served as a member of Governor Arnold Schwarzenegger’s senior staff.

How many more studies do we need before decision-makers decide to take additional bold steps to ensure that California remains the film capital of the world? How many times does a message have to be sent before it resonates and rivets action?

Several studies which focus on runaway film and television production and California’s response to ramped up competition from other states and nations have been rolled out in the last several years, most recently Milken Institute’s study, “Fighting Production Flight:  Improving California’s Filmed Entertainment Tax Credit Program” released last week.    Predecessor studies include those undertaken by the LAEDC and UCLA’s Institute for Research on Labor & Employment along with The Headway Project, among others.

Several messages have evolved out of these studies and industry resources.

  • The value of the industry to California’s economy — more than 200,000 direct jobs are supported.  Each production that leaves the state means direct job losses plus less spending at local businesses, delivery services, carpenters and make-up artists, to name a few.
  • The intense competition California faces — each year, competing states that offer substantive incentives experience dramatic growth in film and television production at our expense.  Production spending in Louisiana topped $1 billion last year, a nearly 25,000 % increase since the state adopted attractive tax incentives in 2003.
  • The fact that the California Film & Television Tax Credit Program, adopted by the legislature in 2009, is working but doesn’t go far enough — the Milken Institute report concludes that the incentive program has a real impact in arresting the decline of filmed entertainment spending and employment in California. And, the demand for tax credits is extremely high, with allocations exhausted on the first day, leaving behind long waiting lists in excess of 300 applications.  Other sources indicate that, while a small number of projects that do not receive an incentive still film in the state, statistics show that those that remain are small, low budget films while larger films with the potential to create thousands of jobs, leave for other states that provide richer incentives.
  • The value of the credit — for every tax credit dollar issued under California’s program, it is estimated that at least $1.04 in tax revenue will be returned to state and local governments.
  • The need to extend California’s program another five years to create more jobs and provide certainty to those producers who must make long term decisions as to where to film.  And, the need for modifications that will grow jobs and strengthen California’s competitive position. Suggestions range from “Increase the Size of the Annual Allocation from $100 million to $200 Million” (the Headway Project) to “Remove, or at least raise, the production budget cap to attract big-budget projects.” (Milken Institute), among other numerous recommendations.

Enough studies.  The messages are clear.  Are they getting through to Sacramento?  Maybe.  Hopefully, yes.  What happens is anyone’s guess.

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