Legislation to extend California’s tax credit production incentive program has cleared the Assembly Appropriations committee — but with the recommendation that the program’s extension be reduced from five to two years.
The reduction synchs up terms of the bill — AB 2026 — with a similar version approved by a Senate committee in late June and signals that the final legislation will be for only two years.
The Assembly bill, authored by Felipe Fuentes (D.-Sylmar), passed the appropriations committee unanimously after it was amended to become a 2-year extension from the original five years. It now goes to the full State Assembly for a vote, which will likely take place next week, Fuentes spokesman Ben Golombek said.
The Senate legislation — SB 1167 by Sen. Ron Calderon (D.-Montebello) — was placed into the suspension file on Tuesday by the Senate Appropriations Committee.
Calderon agreed to the reduction in June because of the deep cuts that were contained in the state budget.
The reduction in the number of years came following a report from the California’s Legislative Analyst Office, which asserted that the program benefits are not generating enough economic activity to make up for the attendant reduction in tax revenues.
The Legislative Analyst Office, charged with providing nonpartisan fiscal and policy analysis, came under fire immediately from supporters of the program, who said analyst Mac Taylor’s report was sloppy and incomplete — underscoring the fact that there’s no unanimity among economists about the benefits of such subsidies, which are offered by 40 states and dozens of foreign governments.
The 3-year-old program is strongly endorsed by the film business as a sensible method to create below-the-line jobs by incentivizing producers to remain in the Golden State. Currently, the state of California provides $100 million in annual tax credits for productions, but demand far exceeds supply, with 28 projects selected by lottery out of more than 330 in the most recent round earlier this month.
Fuentes carried a bill last year that hit a rough patch last year in the state Senate, which ultimately opted for a one-year extension rather than the five-year extension original planned.
Program backers have asserted that the one-year extension, as opposed to a multiyear program, has created a lack of certainty among producers deciding whether to shoot in California.
Taylor’s report took issue with the assumptions in a pair of reports that touted the economic benefits of the incentive program — a study conducted by UCLA’s Institute for Research on Labor and Employment as part of the Headway Project, which found that the tax credit program is benefiting the state economically with an impact of $1.04 for every dollar spent, and a report issued last summer by the Los Angeles County Economic Development Corp. and financed by the Motion Picture Assn. of America, which estimated that figure at $1.13 for every $1 the state allocated.