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

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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