Louisiana Gov. Bobby Jindal, running for president on the GOP ticket, is, perhaps ironically facing some of his toughest criticism from a sector of the business community: film and TV producers who have generated new jobs in his home state.
The reason: legislation Jindal signed recently that for the first time limits the state’s production tax incentive program, raising the prospect that the steady stream of big-budget tentpole productions flowing to Louisiana — like “Jurassic World” and “Fantastic Four” — will slow to a trickle.
How did the Pelican State get to this point? Critics say Jindal’s pledge not to raise taxes limited his options in closing a difficult budget shortfall.
Patrick Mulhearn, exec director of Celtic Studios in Baton Rouge, says the state got caught in a perfect fiscal storm.
“Anyone who follows Louisiana politics will tell you that the ‘no tax’ pledge was a major contributing factor for cuts to a number of business tax exemptions, including motion picture tax credits,” he says, adding: “By law, the state has to balance the budget every year. Louisiana’s budget has some structural problems that force cuts to healthcare and higher education when the state budget needs tightening. No one, including the film industry here, was in favor of seeing that happen.”
The result has been a series of budgetary contortions, ostensibly to make the numbers line up while also making a plausible claim of not raising taxes.
Technically, the state is not eliminating or even limiting the amount of tax credits that can be issued.
Instead, it has placed a $180 million-per-year limit on the amount that can be redeemed. If that limit is reached in any given year, those unable to claim a credit against their tax liability will receive priority for the following fiscal year.
The legislation also suspends for a year the state’s buyback program, which allowed tax credits to be cashed in for 85¢ on the dollar. And the new restrictions cap tax credits for any individual project at $30 million.
Fueling the move to scale back the program: a Dept. of Economic Development study showing the tax credits supported 12,107 jobs last year, but that the state was getting back just 23¢ on the dollar to make those jobs happen.
The MPAA challenged the methodology of that report, but the notion persisted that the tax credits were a cost to the state budget. And while the MPAA argues that production brings in a multiplier of spending and tourism, that’s a tough case to make when politicos are on the hunt for cuts.
“I don’t think there’s any question that this is a subsidy program, and what (lawmakers) are doing is reducing subsidies,” says Jan Moller, director of the Louisiana Budget Project, which has been critical of the tax credits.
Mulhearn says he’s become more bullish about the program. He doesn’t think the state will reach the $180 million cap in the 2015-16 fiscal year, and cites reports that the Louisiana Dept. of Revenue is looking into ways to assure holders of credits that they will continue to have value.
Moreover, he says, it’s likely that the next governor, to be elected in November, will call a special session in January to fix the budget.
All major candidates have signaled they won’t sign the anti-tax pledge.