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Milken Institute Report Examines Track Record of Entertainment Tax Credit Program

Have California's Film Production Incentives Worked? (June 14, 2012)

LOS ANGELES, CA -- (Marketwire) -- 06/14/12 -- In 2009, the California Legislature passed the Film and Tax Credit program to support a vital component of the state's economy. Next month, the final funding for the program will be allocated. But how effective has the measure been at helping the movie and video industry -- and the overall state economy?

A report from the Milken Institute's California Center answers that question and offers political leaders and the filmed entertainment industry the most in-depth and independent analysis of the film incentives program to date. Overall, the report concludes that the incentive program had a real impact in arresting the decline of filmed entertainment spending and employment in California. The most important element in revising the incentives is to attract new productions to the state, rather than pursing productions that are leaving in pursuit of the lowest overall costs.

Among the findings of the report, Fighting Production Flight: Improving California's Filmed Entertainment Tax Credit Program:

  • During the first two years of the incentive program, 125 different projects were funded, with $300 million in credits resulting in more than $2.3 billion in direct spending by the productions that received credits.
  • The motion picture and video industries added an average of nearly 20,000 jobs per month in California from late 2010 through 2011 -- at a time when the state's total employment was still dropping year-over-year.

The report focuses on the data and results of the first two years of the tax credit program and examines what key elements can be adopted from other states and countries to make the current program more effective.


"For California, the film incentive program creates demand for high-paying jobs by retaining productions that otherwise would have left the state," says Kevin Klowden, director of the California Center and lead author of the report. "Our study examines how the incentive program could be even more effective, and not only in Los Angeles."

The report offers many specific recommendations for boosting filmed production in the state, including:

  • Extend the 2009 incentive program and eliminate contingencies such as the cap on a film's budget.
  • Deepen and broaden California's entertainment industrial base, including incentives to promote on-location filming outside Los Angeles.
  • Target television production and provide an incentive to hour-long network dramas, which represents the best return from credits, both in investment and longer-term employment.
  • Attract more foreign and international productions, in part by ensuring that a certain percentage of the tax credit budget is used to gain foreign investment.
  • Expand the credit pool from the current $100 million per year to a level that can better accommodate demand, and create a separate pool specifically targeted towards television.

Download a copy of the report at www.milkeninstitute.org

About the Milken Institute
A nonprofit, nonpartisan think tank, the Milken Institute believes in the power of capital markets to solve urgent social and economic challenges. Its mission is to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital and enhance health.

www.milkeninstitute.org
@milkeninstitute

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Contact
Conrad Kiechel
Director of Communications
(310) 570-4668
E-mail: ckiechel@milkeninstitute.org


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