I’ve been posting quite a bit about California lately and new numbers coming out about the effectiveness of the states one-year-old film incentive, which is rather modest. And certainly, while I have called the modesty of the California film incentive a pretty smart move, I have also written about tweaks to the program that would actually increase certain parts of the program.
In any event, Governor Schwarzenegger’s office released a press release on July 30th about the film incentives contributions to the state. At first glance, I was rather taken aback by the claim that the spending for incentive-qualified projects was “estimated to bring $2 billion in direct spending to California communities.” How could a $100 million-per-year program result in $2 billion worth of direct spending? In fact, the $2 billion estimate is based on roughly $300 million of incentive qualified spending for roughly 107 projects over several years. In other words, yearly direct spending from incentive-qualified projects is not $2 billion:
In its first year, the California Film Commission, which administers the Program, allocated $200 million in tax credits to 77 projects. This year, another 30 projects are set to receive an additional $100 million in tax credit allocations. Together, they are estimated to bring $2 billion in direct spending to California communities, which includes $736 million in wages paid to “below-the-line” crew members (electricians, grips, drivers, costumers, etc), according to data compiled by the Film Commission.
If the economic value of film incentives is questionable (in terms of if they generate or drain revenue or are neutral), their ability to create jobs (permanent or not) is beyond question. That said, the employment numbers from the California Film Commission seemed rather extraordinary:
The California Film Commission reports that the 77 first-year projects approved for tax credits will hire 18,200 crew members, 4,000 cast members, and over 100,000 background or “extra” players. These approved projects include 51 feature films, both studio and independent, seven television series and 14 made-for-television-movies.
If these numbers are accurate, then it is great news for California as it fights to stem runaway production. And since California (and perhaps New York) is the only state fundamentally threatened by runaway production, I like to say that it is the only state that can legitimately claim its film incentive is actually a weapon to fight runaway production. In states of opportunity (LA, NM, MI etc.), on the other hand, film incentives have been enacted to cause runaway production…not prevent it.
The employment data and direct spending numbers from California still seemed almost too high to me and I decided to compare the initial success to that seen in Louisiana. In 2007, roughly 74 projects shooting in Louisiana were credited for the creation of 6,230 direct and indirect jobs. This is less than half of the “18,200 crew jobs” (which I assume means just direct jobs) attributed to the 77 projects in California. However, of California’s 77 qualified projects, 51 were feature films whereas in Louisiana, the number of feature films that qualified there in 2007 was roughly 19. Assuming feature films employ much greater numbers than tv shows or other projects, this alone could explain why California’s employment success was seemingly much greater.
The following is from the 2009 ERA Report for Louisiana:
the State of Louisiana will issue an estimated $115 million in tax credits for projects with certified and estimated expenditures incurred during 2007. Combined these projects had an estimated $429 million in qualified expenditures which generated a total economic benefit to the State of $763 million. This represents an economic stimulus of $6.64 for every $1 in tax credits issued for qualifying motion picture expenditures during 2007. This has grown 4.6 percent since 2005. The $115 million in tax credits supported the creation of 6,230 jobs (direct + indirect) throughout the state. These jobs paid an average annual salary of $32,690 at the cost of $18,460 in tax credits each during 2007. The State of Louisiana directly received $14.6 million in taxes and fees resulting for the $763 million in economic output.
