Runaway Film Bill Hits Snag

Gov. Arnold Schwarzenegger’s script to stem runaway film production in California with as much as $100 million in annual tax breaks is getting panned at the Capitol.

The bill by Assembly Speaker Fabian Nunez (D-Los Angeles), which the governor made a top priority, was on the legislative fast track until Schwarzenegger’s fellow Republicans balked, arguing that it amounted to a giveaway for Hollywood. Now, the bill can’t even get a hearing.

With the scheduled legislative recess looming late today, Schwarzenegger and Nunez are considering a switch in tactics. Nunez said he hoped to line up verbal commitments from legislative leaders to put the proposed movie tax credits into the state budget for the spending year that begins in July.

“I feel that one way or the other we are going to get this done,” Nunez said Wednesday.

That’s little comfort to Hollywood labor unions, independent movie producers and film commissioners, who have pushed unsuccessfully for years to enact sweeteners that they argue are needed to keep productions from fleeing.

“Other countries and other states, more and more, are picking off our jobs, one movie at a time,” said Amy Lemisch, the Schwarzenegger-appointed director of the California Film Commission.

Many of those competing states offer refundable tax credits or similar financial enticements to filmmakers, Lemisch said.

A former top action star himself, Schwarzenegger is pushing the Nunez plan but to date has done so only behind the scenes and through staff members. Spokesman Vince Sollitto said the governor had been clear in his support for the movie bill, although he could not name an instance in which Schwarzenegger publicly called for its passage.

Labor officials groused that Schwarzenegger, despite declaring his desire to keep production in the state, had been ineffectual in enlisting his own party’s support.

“If the governor can’t move Republicans on this main part of his legislative agenda, we’re not going to move them,” said Barry Broad, a lobbyist for the American Federation of Television and Radio Artists

The Nunez measure would provide refundable tax credits of as much as $3 million a film, even when producers owe no corporate income taxes. The industry has been lobbying for a tax credit of as much as 15% of the cost of wages and equipment on movies made in California. As currently written, the Nunez bill, AB 777, could cost as much as $1 billion over 10 years.

Republican legislators said that although they were eager to help the film industry, they did not want to give preference to filmmakers over other industries and employers, which also needed tax cuts to create jobs.

“We don’t generally favor corporate subsidies,” said state Senate Minority Leader Dick Ackerman (R-Irvine).

Ackerman said he had told the governor he wanted to explore a variety of incentives, such as tax credits for the purchase of manufacturing equipment, as part of next year’s budget.

“We want to look at other industries that are threatening to move out,” he said.

Ackerman stressed, however, that he had made no commitment to including refundable tax credits for movie producers.

With a potential $6-billion budget shortfall pending, lawmakers are going to have a difficult time finding $100 million to give to filmmakers, said Jean Ross, director of the California Budget Project, a Sacramento-based group that advocates for poor and working-class people.

“If proponents think this is worth $1 billion, they ought to say what they think should be cut,” Ross said. “They ought to say it’s a higher priority than health coverage for children or education.”

Ross also questioned whether state subsidies were really needed, considering that production in Southern California was rising, with TV especially strong.

Lemisch acknowledged that television work was booming but noted that much of the growth was in low-budget reality shows, which failed to compensate for losses in feature film jobs.