California lawmakers began a discussion Thursday about removing the cap on the state’s $750 million incentive for film and TV production, while acknowledging that such a move would face budget hurdles.
At an Assembly committee hearing in North Hollywood, a handful of state lawmakers heard testimony from union leaders and industry advocates who argued that the program — which was doubled last year — is not enough to stop the outflow of production jobs.
Betsy Beers, the creative partner of Shonda Rhimes, told the committee that she had hoped to shoot a new “Grey’s Anatomy” spinoff in Santa Clarita. But the show, which is set in West Texas, did not get a California tax credit.
“We lost a lot of time, and a lot of money, and now we are filming in Albuquerque,” Beers said. “We want to be here.”
Because the state incentive is capped, projects must apply during periodic windows and then compete with other shows on a “jobs ratio” score. Beers said the show lost out initially because it didn’t get score highly enough. When ABC tried again in the fall, the program was already oversubscribed and was no longer taking applications.
“The program is still not competitive or predicable enough to address the loss of production to other regions,” said Arlen Valdivia, vice president of state government affairs at the Motion Picture Association. “There needs to be more done to make California competitive.”
FilmLA, the permitting agency, reported last week that production volume continues to fall in the Los Angeles area, even as the share of scripted TV shows receiving a state subsidy has nearly doubled. Several speakers at Thursday’s hearing called for eliminating the $750 million cap entirely — saying the limit leaves producers uncertain about whether they will get the credit.
Georgia’s credit has no limit and New York’s allows the state to pull from allocations for future years — amounting to an uncapped credit. Rick Chavez Zbur, who chairs the Assembly Select Committee on Growing and Retaining the Creative Economy in California, said he expects to make improvements in the next legislative session.
“I want to try to do our best to make whatever changes we can, and I think either increasing the cap or eliminating it,” Zbur said after the hearing. “But you know that is a heavy lift. But we’re going to try this year to make as much progress as we can.”
Lawmakers are also dealing with a structural deficit and deep cuts to Medicaid — which has intensified competition for tax dollars.
During the hearing, Zbur floated the idea of “dynamic scoring” — suggesting that the state should account for the benefit from the film credit instead just looking at the headline cost. That idea, he said, would be key to persuading lawmakers that an unlimited credit is a worthwhile investment.
“The way we’re looking at the return needs to be what we’re focused on,” said John Harabedian, another member of the committee. “It becomes a regional fight. It becomes a best-use-of-a-dollar fight… The numbers are going to convince our colleagues that don’t necessarily live in L.A.”
Rowan Isaaks, an economist with the state Legislative Analyst’s Office, cited research showing that film credits return 20-50 cents for every dollar invested by the state. He also expressed skepticism about dynamic scoring. “It’s subject to a lot of uncertainty,” he said.
Stephen Cheung, the president of the Los Angeles Economic Development Committee, cited his own group’s research, which found a return of $1.07 to state and local coffers. That report was funded by the MPA.
Assemblyman Nick Schultz floated the idea of extending the expiration date of the state program, which is currently set to sunset in 2030, as a way of offering greater certainty to productions. He and other also suggested providing a subsidy for above-the-line costs — salaries for actors, directors, etc. — and opening up eligibility for the program to commercials and game shows.
“Why should we be picking and choosing?” he asked. “Why should we be picking winners and losers? Let’s incentivize all of it to stay.”
The state raised the base credit from 20% to 35% last year, while increasing the overall cap from $330 million to $750 million.
“The higher credit might mean fewer projects overall,” Isaaks noted. “There’s a possibility that the more generous our credit is, the fewer productions we can fund in total.”
Since Gov. Gavin Newsom expanded the state incentive last year, lawmakers have added additional measures to bolster it. The Legislature created a $10 million incentive for post-production and passed a bill to expedite studio rebates and exempt credits for independent films from a $5 million credit cap.
While Congress is considering a 20% nationwide incentive, several speakers argued that even if that passes, California will still face stiff competition from other states.
“We should not assume the work will return because federal policy changes,” said Lindsay Dougherty, leader of the Hollywood Teamsters.
