A new report by the Milken Institute could provide fresh ammunition to proponents of an expanded state film and TV tax credit.
Set to be released Thursday, the study entitled “A Hollywood Exit: What California Must Do to Remain Competitive in Entertainment -- and Keep Jobs,” paints a bleak picture of the jobs California has lost to New York and other rivals due to the proliferation of film tax credits and rebates.
Among the key findings: California lost 16,137 film and TV industry jobs between 2004 and 2012, an 11% decline, according to figures from U.S. Labor Department’s Bureau of Labor Statistics.
During the same period, New York saw its entertainment sector expand by 10,675 jobs -- a 25% increase -- even though New York is a more expensive place to film. Texas, New Mexico and Louisiana each gained more than 1,600 jobs during the same period, according to the report.
“California’s current tax incentive program is intended to keep shows and movies in the state, but the data show that other states are being more effective in using their incentives to bring in new productions and create jobs,” the report said.
“Ultimately, the main losers in the outflow of productions are local workers, who are forced to make a choice between abandoning the entertainment industry as a primary source of employment, moving to other states, or attempting to keep their homes in California while working on projects elsewhere.”
The employment losses are significant because they represent the loss of high-wage jobs -- an average of nearly $98,500 per person -- and support a host of secondary jobs such as catering and equipment shops that benefit the broader L.A. economy, the report said.
“These are very high-paying middle-class jobs that are very hard to get back," Kevin Klowden, managing economist for the Milken Institute, said in an interview.
The report concluded that despite the rising competition, few states have been successful in building sustainable entertainment bases.
One notable exception is New York, which has invested heavily in its entertainment sector and has experienced the fastest job-growth rate in the entertainment sector, despite an increase in wage costs.
New York offers a 30% to 35% refundable credit, allocating $420 million to film and TV productions -- four times what California awards annually. The state also has actively courted the visual-effects industry by raising the post-production credit from 10% to 30% (35% if the work is completed in upstate New York). The credit also allows production shot outside the state to qualify, a key inducement, the report noted.
The report recommended several improvements to California’s tax-credit program, enacted in 2009. Those include: allowing movies with budgets greater than $75 million and new one-hour dramas to qualify, as well as making digital visual effects eligible for incentives.
Another recommendation is to provide an additional 5% credit for projects that shoot outside of Los Angeles. Most of the proposals have already been incorporated into a bill introduced earlier this month in the Assembly.
Though the report’s authors favor increased funding for California’s film program, they caution against trying to compete in a race to the bottom.
“With film production showing itself to be increasingly mobile, California should not attempt to capture or keep productions that are looking for the highest possible incentives -- that’s a game it can’t win,” they wrote.