California lawmakers initiated discussions on Thursday regarding the potential removal of the cap on the state’s $750 million incentive for film and television production. However, they pointed out that any such changes would encounter significant budget challenges.
Challenges Facing California’s Film Incentive Program
During an Assembly committee hearing held in North Hollywood, lawmakers received testimony from union leaders and industry advocates who argued that the current funding levels—an increase from $330 million to $750 million approved last year—remain insufficient to retain production jobs in the state.
Betsy Beers, a creative partner of Shonda Rhimes, recounted her aspirations to film a new “Grey’s Anatomy” spinoff in Santa Clarita. However, due to the lack of a California tax credit, the production shifted to Albuquerque. “We lost a lot of time, and a lot of money, and now we are filming in Albuquerque,” Beers lamented. “We want to be here.”
Competition and Application Limitations
Under the current system, projects must apply during specific windows and compete with other productions based on a “jobs ratio” score. Beers noted that her project initially lost out due to insufficient scoring. When ABC attempted to apply again, they found the program oversubscribed and closed to new applications.
Arlen Valdivia, vice president of state government affairs at the Motion Picture Association, criticized the program’s limited scope, stating, “The program is still not competitive or predictable enough to address the loss of production to other regions.” Several speakers at the hearing echoed calls for the complete elimination of the $750 million cap, arguing this restriction creates uncertainty for producers seeking credits.
Comparative Analysis with Other States
Other states, such as Georgia and New York, have implemented more appealing incentive structures, with Georgia offering an uncapped credit and New York allowing allocations to be drawn from future years. Rick Chavez Zbur, chair of the Assembly Select Committee on Growing and Retaining the Creative Economy, expressed his commitment to advocating for changes in the upcoming legislative session. “I want to try to do our best to make whatever changes we can,” he stated, acknowledging the challenges ahead.
Balancing Financial Considerations
Lawmakers are also grappling with a structural deficit and significant cuts to Medicaid, making it crucial to thoughtfully allocate tax dollars. During the hearing, Zbur proposed the concept of “dynamic scoring,” suggesting that lawmakers should consider the long-term benefits of film credits rather than just their immediate costs. Another committee member, John Harabedian, emphasized the need for evidence to convince those outside of Los Angeles about the program’s value.
Rowan Isaaks, an economist from the state’s Legislative Analyst’s Office, offered a more cautious perspective, indicating that film credits typically provide a return of 20-50 cents for every dollar invested. He expressed skepticism about the accuracy of dynamic scoring. In contrast, Stephen Cheung, president of the Los Angeles Economic Development Committee, referenced his organization’s findings, which indicated a return of $1.07 for every dollar spent on the incentives.
Exploring Program Extensions and Subsidies
Assemblyman Nick Schultz suggested extending the expiration of the state program, currently set to end in 2030, to provide greater stability for productions. He and others also proposed subsidizing “above-the-line” costs, like salaries for key talent, and expanding eligibility to include commercials and game shows. “Why should we be picking and choosing?” he questioned. “Let’s incentivize all of it to stay.”
In the past year, the state has raised the base credit from 20% to 35%, hoping to bolster the incentive’s attractiveness. However, Isaaks warned that a higher credit could lead to fewer overall projects being funded.
Future Considerations Amid National Competition
Since Governor Gavin Newsom expanded the film incentives last year, lawmakers have introduced additional measures to enhance its effectiveness, including a $10 million incentive for post-production and expediting studio rebates. Discussions are ongoing in Congress regarding a potential 20% nationwide incentive, yet many participants at the hearing cautioned that even such changes may not suffice to revitalize California’s competitive edge in film production. “We should not assume the work will return because federal policy changes,” warned Lindsay Dougherty, leader of the Hollywood Teamsters.
