So perhaps it’s no surprise that Hollywood is in line for a major windfall.
Last month, Newsom proposed to increase the $330 million film and TV tax credit by $30 million for the coming year. But the Legislature wants to go much bigger — offering an extra $180 million spread over two years.
That means that for the next two years, California would be even with New York, which provides $420 million a year in tax incentives to the entertainment industry. Such a sizable increase could also have a long-term effect on the scale of the program, creating an expectation that California will maintain that level into the future.
The Legislature’s proposal is still subject to negotiation with the governor’s office, and it’s not clear exactly when a final number will be announced. Newsom’s office declined to comment.
Newsom’s initial proposal was to use the extra $30 million to lure TV shows to relocate from out of state, which is one of the primary policy goals of the program. The Legislature’s approach is to split that $30 million across two years, and then add an extra $75 million per year to fund recurring TV shows.
Under the law, once the California Film Commission agrees to subsidize a new or relocating TV show, it becomes obligated to keep funding that show over the course of its entire run. But over the years, the commission has created more commitments than it can afford to pay under the current $330 million cap.
Part of the issue is that TV production budgets have increased substantially. The tax credit program mandates a 20% credit on all qualified expenditures for recurring shows, so the credit increases automatically along with budgets. A show that received a certain level of funding in its first year might be eligible for double that amount in a later season.
Industry figures believe the commission has incurred a $150 million “shortfall” for the remainder of the current program.
One option would be to trim the allocation to each recurring show on a proportional basis. The state could also find ways to phase out funding in later years, or drop shows that have lower jobs ratios.
But with the state handing out billions for transportation, housing, education and other priorities, the Legislature has decided it could spare an extra $150 million for Hollywood.
The program was expanded in 2014 from $100 million to $330 million per year. It was renewed in 2018 for an additional five years at the $330 million level. Under the Legislature’s current proposal, the funding level will increase to $420 million for two years before falling back to $330 million in July 2023. The program would also have to be renewed sometime before it expires in 2025.
The Legislature is also working on a “trailer bill” that would mandate additional diversity reporting by production companies and studios.
“The data is important,” said Assemblywoman Wendy Carrillo, who is leading the effort on the diversity component. “We certainly need to look at this particular film tax credit through an equity perspective.”
The California Film Commission previously released data showing that, for 2015-20, the workforce supported by the tax credit was 13% Latino, 6% Black and 3% Asian American. Last week, the state Senate passed a bill, SB 611, that would create a new incentive to hire graduates of a career training program aimed at underrepresented communities. That bill is awaiting approval by the Assembly before it goes to Newsom’s desk.
Under current law, the commission is required to begin reporting diversity data for individual shows later this year, as well as aggregated data.