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Calif. incentive program clears committee
Recommendation is to reduce program from five to two years
By: Dave McNary
Posted On: Jun. 28, 2012
Legislation to extend California's tax credit production incentive program has cleared a state Senate committee -- but with the recommendation that the program's extension be reduced from five to two years.
Senate Bill 1167 was approved Thursday by the Senate Governance and Finance Committee with author Sen. Ron S. Calderon (D-Montebello), agreeing to the reduction in the extension. The legislation is expected to be amended by August, when it would be heard before the Senate Appropriations Committee.
Calderon told Variety that he agreed to the reduction because of the deep cuts that were contained in the recently completed state budget.
"We are having to make tough cuts this year, so two additional years on this program will allow it to be continued -- and not take a dime out of the state treasury," Calderon said. "I applaud today's action by my fellow senators. Protecting one of California's threatened employment bases is an important step in helping Californians climb out of this prolonged economic malaise."
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, offered by 40 states and dozens of foreign governments.
Calderon said Thursday that the LAO report had no impact on the vote.
"If there had been an impact, we would not have been able to get this approved," he added. "The Legislative Analyst Office is not always right."
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.
The original proposed bill from Calderon and a similar bill by Assemblyman Felipe Fuentes (D-Sylmar) would extend the program for five years after it runs out of funds next June. 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.