With anxiety still high among California’s entertainment workforce about the departures of film and TV productions from the Golden State, Gov. Gavin Newsom is proposing drastic changes to the state’s film and TV tax incentive program.
At the Raleigh Studios in Los Angeles, adjacent to the Paramount Pictures lot, Newsom called for a $420 million raise to the cap of the incentive program from $330 million to $750 million, topping the $700 million cap of the New York tax credit program after it was raised to that amount from $420 million last year.
“We’re in a position that we can afford this, and we need to do this. This is about investing and recognizing that the world we invented is now competing against us,” Newsom said.
The governor of one of the most liberal states in the country has been known in recent years for openly criticizing Republican-run states, and took a few shots at Georgia, which doesn’t put a cap on its incentive program and has given out well over $1 billion in tax credits this year.
“I don’t know how they can continue to afford that program, but we’ll see how long that lasts down in Georgia,” he said. “But I will say: compare the values of this state to the values…as it relates to workers, and women’s rights, LGBTQ rights, civil rights, voting rights down in the state of Georgia. I think it’s a pretty damn easy decision.”
Newsom was joined by Los Angeles Mayor Karen Bass, California Film Commission Executive Director Colleen Bell, and various officials and members of entertainment unions DGA, IATSE, SAG-AFTRA and LiUNA. They were also joined by Hollywood Asm. Rick Chavez Zbur and San Gabriel Foothill State Sen. Anthony Portatino, who will be the primary legislators navigating the proposal through the state budget process in Sacramento next year.
“The next time you watch a film or TV series…keep an eye at every time you see Georgia’s peach in the credits. That breaks my heart because that is a sign of the jobs leaving California,” Zbur said.
There’s no guarantee that this proposal will be passed through the state legislature as presented. Last year, proposals to make tax credits for eligible productions refundable did pass, but not without significant debate among Sacramento lawmakers that did not fall along party lines.
While Democrats in Los Angeles, the Bay Area and other constituencies with significant investment in the entertainment industry supported that move, there was pushback from Republicans and Democrats outside major production areas that were looking to protect important services for their constituents from major cuts amid a state budget crunch that is expected to persist into 2025.
Newsom’s support will give the chances of a tax credit cap raise passing a significant boost, and that’s something that not everyone in Hollywood was banking on. Two major studio executives told TheWrap earlier this month that they were skeptical that Newsom would have an appetite for backing a major subsidy for entertainment given his recent focus on getting the state budget balanced.
But Newsom said Sunday that during the 2023 discussions around making the tax credit refundable, there were longer-term discussions with industry lobbyists and union leaders about the need for more significant change to make California more competitive for productions.
The governor said that his office expects that the state budget will be in a better place than it was last year after his office and Sacramento legislature mapped out a two-year outlook of the state’s budget during the recently closed legislative session, making the program financially feasible.
Hollywood unions, film commissions, and local officials like Mayor Bass have sounded the alarm bells about how production work in California has not returned since the end of last year’s double strikes. According to FilmLA’s most recent report, only 5,048 on-location shoot days were recorded in Los Angeles County this past quarter, a 5% drop even from last year when writers and actors were still on strike and a staggering 36% drop from the five-year average.
“We have to do everything we can to protect one of the pillars of our economy in Los Angeles. It’s not just the entertainment businesses and workers, but all the ancillary businesses from flower shops to restaurants that take part in this industry,” Bass said Sunday. “One message we want to send from the mayor’s office is ‘We have your back.’ We hoped everything would get right back to normal, but that is not what has happened.”
The drop was caused in large part by the 56% year-over-year drop in reality TV shoots, as reality shows, game shows, and other alternative TV genres are leaving California for other states or even out of the U.S. entirely. Fox’s game show “The Floor,” which is airing its second season, is being shot in Ireland as part of a production deal made by the network to shoot alternative content in the country.
Organizations like FilmLA and the California Film Commission have called upon legislators to expand the types of productions that can qualify for the tax incentive program to reverse this recent trend.
“The current eligibility requirements for the program were established 10 years ago and addressed scripted TV dramas and feature films that were leaving California at the time,” Colleen Bell, executive director of the California Film Commission, told TheWrap earlier this week. “This should be changed to reflect the new nature of our industry, which is far more competitive not just in the U.S. but worldwide.”
