Study: California Incentive Program Needs Major Overhaul to Save Production Jobs

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The Milken Institute has called for a major overhaul of California’s film incentive program in a study released Thursday that recommends the state open the program to bigger-budget fare and add incentives for vfx work and investments in digital infrastructure.

The report from Milken Institute’s California Center shows that the Golden State lost more than 16,000 high-paying film production jobs between 2004 and 2012 — a more than 10% drop at a time when the state’s primary rival, New York, added 10,000 jobs thanks to its aggressive courting of film and TV biz with generous incentives. The report notes that film production jobs are the worst kind of middle-class income losses for the state with the average annual salary running about $95,000.

The report was issued two weeks after legislation was introduced in California to improve the Golden State’s 5-year-old tax credit incentive program,  currently limited to $100 million in total tax credits annually.

“California should ensure enough incentives to balance out its higher costs and the increasing aggressiveness of other states without sacrificing its future,” the Milken study concluded.

The report, titled “A Hollywood Exit: What California Must Do to Remain Competitive in Entertainment—and Keep Jobs,” urges state leaders to open its existing incentive program to broadcast network TV series and big-budget films, rather than focusing on cable series and pics budgeted under $75 million.

SEE ALSO: Eric Garcetti: L.A. Mayor Declares ‘State of Emergency’ as Movie, TV Production Flees Hollywood

Vfx work and animation production should also be able to tap incentive dollars, and the report calls for eliminating the lottery system used to award coin to pics once a year in favor of making grants on a year-round basis.

“With film production showing itself to be increasingly mobile, California should not attempt to capture or keep productions that are looking for the highest possible incentives,” said Kevin Klowden, director of Milken Institute’s California Center. “Instead we suggest ways for California to leverage its strategic advantages, namely serving as the headquarters of most studios, distributors and producers, its role as home to the largest concentration of entertainment talent in North America, and its strong existing infrastructure.”

The report also offered an optimistic conclusion — that California can bolster its status as the industry’s production center.

“The relatively small size and scope of permanent employment in the sector in most competing states hinder them from providing a fully sustainable entertainment cluster as yet, with the notable and clear exception of New York,” it said. “Even states that show signs of being effective rivals, such as Louisiana and Georgia, lack either the population base or the effective concentration to be a full threat. Only New York has both in its favor, but it is burdened with costs higher than those of California.”

The report noted that the main losers in the outflow of California productions are local workers,  forced to make a choice between abandoning the entertainment industry as a primary source of employment, moving to other states or attempting to keep their homes in California while working on projects elsewhere.

“Currently, workers appear to favor the last option, but this is clearly not sustainable over the long term, especially when options such as New York exist,” it noted. “Ultimately, the goal for California must be to leverage its strategic advantages—namely, serving as the headquarters of most studios, distributors and producers; its role as home to the largest concentration of entertainment talent in North America; and its strong existing infrastructure.”

The new state bill, the California Film and Television Job Retention and Promotion Act, was introduced Feb. 19 by Assemblyman Raul Bocanegra and Assemblyman Mike Gatto.

Bocanegra issued a statement Thursday in response to the report: “The Milken Institute study released this morning confirms what every objective-economic analysis of the issue has shown: Runaway production, and the erosion of California’s film and television industry, has caused substantial harm to our families, our communities, and our state and local economies.”

He noted that since 2004, California has lost more than 16,000 high-paying middle-class jobs in the film and television industry.

“By enhancing California’s film and television production-incentive program, California will remain competitive in attracting big-budget productions,” Bocanegra added. “However, in a market saturated with subsidies, where forty-three states offer entertainment incentives, California must create a thoughtful and distinctive incentive package. Job incentive programs like AB 1839 will help keep productions in California, creating statewide benefits and revenue that will stimulate our economy and preserve the jobs that many Californians and their families depend upon.”

The bill would renew California’s tax incentives so it runs an additional five years, through the 2021-22 fiscal year; lift a $75 million budget cap on productions that are eligible for the program; and widen eligibility to all network and cable dramas. The current program limits participation to basic cable dramas.

Lawmakers have yet to place a dollar figure on how much they want to make available each year for movies and TV shows. Demand current far exceeds supply with the current $100 million per year funding running out on the first day of a lottery.

Milken Institute is hosting a forum on its film incentive proposals tonight at its Santa Monica headquarters. KPCC host Larry Mantle will moderate a panel with reps from 20th Century Fox, L.A. Mayor Eric Garcetti’s office, the Directors Guild of America and others.

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  1. GKN says:

    “and widen widen elgibility?” You better check your spell-check.

    As to all the urges below for California to join the so-called “right-to-work” states (which should be called the “right-to-lose-your-rights” states, I do hope California won’t prove that stupid or inhumane. The govt is letting corporations exploit people to death as it is,overturning a century’s worth of gains for the 99% so many gave their lives for. You folks are hopeless dummies. How can you be that naive?

  2. George says:

    The unions are still flipping productions in Louisiana and Georgia, they used to ignore anything under $1.5M, then they started going after $1M projects and now they’re flipping projects as small as $500K. The unions are equally hungry for new revenue and the experienced workforce is primarily union. If you end up with a picket line, your union crew will NOT cross the line and they will organize you, that will happen in CA, LA or in GA! Film and TV production is becoming more dynamic and employing a wide range of disciplines. Film is to CA what casinos are to NV, the state can continue to dig their heels in the sand and ignore what the industry is doing or they can step up and put a competitive incentive program together modeled after NY. CA should also consider what NY is doing to attract start-ups. The incentives should be focused on real CA residents and vendors, not people from Vancouver and Atlanta going to CA for the run of show and then leaving. So many production services companies in CA have died over the past 8-10 years, it’s time to bring that revenue back to CA. Embrace the unions, don’t spend so much time and effort trying to avoid them, spend it on making a deal upfront, they will respect you for it and be fair.

  3. pops07 says:

    If the politicians really wanted to save production jobs, they would make California a true right-to-work state.

    • Brian Dzyak says:

      Right to work for less, you mean?

      “Right to Work” is just a way to divide labor and make everyone so desperate that they’ll take any level of pay just for something.

      I mean, if that’s the way to get jobs, all the film crews have to do is agree to work for $1 an hour and give up all other contractual “perks.” The OT thing is a State law so we can’t give that up on our own. And if the demand is for the State to hand over tax bribes to attract production to the State, then why not just cut to the chase and give them 100% tax amnesty? THAT will bring ALL production back to California tomorrow.

      That’s the end game in this “tax incentive” scam. If everyone is so eager to get on board with it, let’s just jump to the end and get it over with.

  4. Brian Dzyak says:

    The Tax Bribe Scam is not something that California taxpayers should get stuck with.

    What needs to happen is to end this practice across the board. One way may be to sue Corporations under US Code – Chapter 41: EXTORTION AND THREATS for pitting local and State governments against one another in the game to see who can offer the biggest bribes.

    This said as a film industry professional living in California (but mostly working in Bribe States like Georgia and Louisiana).

    • Jennifer says:

      You do realize that other industries do this as well. Where I come from in PA,when they opened up a Wal-Mart in the area (big deal!) the company didn’t have to pay property tax (among a couple of other taxes) for 7 years. So it’s nothing new, it’s all part of playing the game of getting industry and jobs to your area. So stop saying it’s just films & TV. You would have to change to whole system. Perks are giving to any industry/company that wants to set up shop. They will go with the best deal for themselves not how it effects you. It’s not playing nice, but business never does.

      • Brian Dzyak says:

        I never said it was “just” the film industry. Up in Seattle, Boeing recently threatened to move if they didn’t get MORE tax breaks on top of the already $9 BILLION they currently receive.

        This “tax incentive” scam is literally destroying the tax base of our nation making it impossible for municipalities to pay for their infrastructure. Which, arguably, is what CONservatives want in their never ending desire to privatize absolutely everything.

        What Boeing did as well as film companies do is nothing short of extortion which is why this should be a Federal level lawsuit to put a stop to it.

    • pops07 says:

      Your reference to Georgia and Louisiana “tax bribes” is a small component of the issue. These are right-to-work states. This is a primary attraction.

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