California Politicians Shift on Film Subsidies as Hollywood Drives Jobs and Revenue

California's lawmakers have dramatically altered their stance on subsidies for the film and television industry, shifting from opposition to strong support. The reversal reflects a broader shift in the state's priorities, as politicians and labor unions recognize the industry's importance to local economies and job creation. In a notable example of this shift, the state legislature recently approved a budget that includes a $750 million subsidy for the film industry, more than 14 times the amount initially proposed by Arnold Schwarzenegger in 2005.

Key Takeaways:

The California legislature has approved a $750 million subsidy for the film and television industry, a significant increase from the initial $50 million proposal made by Arnold Schwarzenegger in 2005.
The subsidy is expected to create thousands of good-paying jobs and help keep film and television production in the state, which has been declining over the past decade due to competition from other locations offering tax incentives.
Labor unions, which were initially divided on the issue, have come to support the tax credits, recognizing their importance to working-class jobs in the industry.
California's program is designed to ensure that funding is directed towards projects most likely to create jobs, and it requires projects to spend a certain amount of money locally to qualify for the tax credits.
Industry advocates argue that the government funding is worthwhile because it stimulates other economic activity, such as hiring local caterers, hoteliers, and dry cleaners.
Some economists have raised questions about the wisdom of subsidizing the film industry, citing concerns about the potential return on investment and the fact that most Californians do not benefit directly from the subsidies.

Statistics:

Over the past 10 years, production in Los Angeles has decreased by more than one-third (FilmLA data).
California's film incentive program has grown from $100 million to $330 million per annum since its inception in 2009.
20 to 25 percent of qualified spending is eligible for tax credits under California's current program (The bill by Senator Allen and Assemblyman Zbur would increase this credit to 35 to 40 percent).
State economists estimate that every dollar spent on film incentives yields meager returns, as low as 15 or 19 cents on the dollar (Independent fiscal monitors for states like New York and New Jersey have found).
California is facing a $12 billion budget deficit, which has led to cuts and rebates in various areas, including dental care for poor people and some payments to public universities.

Sources:

(The New York Times)
(The New York Times)
(FilmLA data)
(Interview with Kim Nalder, political science professor at California State University, Sacramento)
(Interview with Rebecca Rhine, top official at the Directors Guild of America)
(Interview with Charles Rivkin, chief executive of the Motion Picture Association)
(Interview with Patrick Button, associate professor of economics at Tulane University)
(Interview with J.C. Bradbury, economics professor at Kennesaw State University)
(Derrick Bryson Taylor, The New York Times)