California's film tax credit program said to be losing money

The findings from the nonpartisan Legislative Analyst's Office run counter to two previous studies, one by the Economic Development Corp. of L.A. County and another by UCLA. (Earlier this month, the Milken Institute released a mostly positive report on the program.) The EDC and UCLA studies say that for each dollar of credit from the Film and Television Tax Credit Program, Sacramento receives more than a dollar in tax revenues. But the LAO disputes those findings. It says that each dollar of tax credit results in less than a dollar in tax revenues. If less money is coming in than going out, it's not exactly wonderful. The LAO report also questions the amount of economic activity that the program generates, pointing to assumptions made in the EDC report that might be overstated. Five areas are identified:

--Unknown assumptions embedded in the LAEDC economic models and their failure to consider the benefits of alternative public or private uses of tax credit funds (which could result in the credit program having significantly less net benefit than shown in the studies).

--In-state film activity that would occur in California without any tax credit (which results in the credit program having less economic and tax net benefits than shown in the LAEDC study).

--In-state economic and employment activity resulting from out-of-state productions (which results in the credit program having less net benefit than shown in the studies).

--Crowding out effects (which result in the credit program having less net benefit than shown in the studies in at least some years).

--Effects of film-related tourism (which would likely not result in significant changes in net benefits in most years).

For proponents, the timing is not great. Lawmakers are currently considering an extension of the $100 million annual film tax credit for five more years. The program has been very popular within the entertainment industry and among L.A. legislators. Folks in other parts of the state are far less enthusiastic, especially in the context of California's budget woes. Since the tax credit program is still new, and this data isn't all that easy to plow through, the cost/benefit numbers have been bouncing around quite a bit. But the 8-page Legislative Analyst assessment raises some obvious questions about whether this giveaway is such a great idea - and more to the point, whether runaway production is such a big problem after all.

Earlier:

Tax credit program has helped stem runaway production, but...

Film incentive program is a plus for state economy. But by how much?

Report: Film tax credits are not big job generators