Cuts to film incentive program could help balance state budget

Royal Oak was the scene of filming for "Prayers for Bobby" last year. (Creative Commons photo by annethelibrarian via Flickr)

As lawmakers continue to negotiate next year’s budget, some are urging changes to the state’s film credit program. According to the Michigan Senate Fiscal Agency, the program is expected to cost the state $150 million in the next year while providing unclear job benefits.

Lawmakers must agree on a budget by the end of Wednesday or the state will shut down. Drastic cuts in everything from education to prisons seem likely as they try to close a $2.8 billion budget gap.

Michigan’s film incentive program, enacted last spring, is among the most generous of such state programs. It offers reimbursement of up to 42 percent of production costs associated with a film.

Supporters of the program say that it will help develop a new industry in a state that desperately needs one.

At the quarterly meeting of the Michigan Film Board held during the Traverse City Film Festival in August, Michigan Film Office Director Janet Lockwood told a crowd of film enthusiasts. “The program continues to bring in millions of dollars and hundreds of jobs. Everyone knows that.”

Lockwood said that 75 companies have applied to shoot in Michigan this year.

But Republican State Sen. Nancy Cassis of Novi argues that the state cannot afford to solicit these companies by offering to subsidize their productions. Cassis has been among the most vocal advocates of reforming Michigan’s film program. Earlier this year she introduced legislation to cap the amount the state spends on movies and require more detailed financial disclosure by the state film office.

“We are prepared to pass an all-cuts budget with no tax increases,” Cassis said in a telephone interview on Tuesday. “If the issue of increasing taxes should come up, we are prepared to show them where the savings are. The biggest savings is eliminating this so-called tax credit which eliminates all the tax liabilities and sends them a check from our general fund. … We could save up to $350 million by just looking at refundable credits, the biggest of which is the film credits.”

Cassis said that the state should focus on reducing the tax burden for small businesses which she said create at least 70 percent of the jobs in Michigan.

Cassis said that as lawmakers face tough decisions on balancing the budget, more are willing to re-examine the film program.

“Are you going to prefer a billionaire Hollywood producer or kids in schools, revenue sharing and assuring that seniors are protected under Medicaid? When did Hollywood producers become a core function of government?”

Cassis said that recent allegations of corruption and fraud in the Louisiana and Iowa film offices show that Michigan’s program should be reformulated so that it is more transparent.

“I think the public is owed access to information on how this money is used,” she said.

According to Senate Fiscal Agency economic analyst David Zin, the statute that created Michigan’s film program is written in a way that makes it hard to know how public money is spent on filming.

The Michigan Film Office reported that 2300 film industry related jobs were created in the course of 2008 productions, Zin said, but the office is not required to note how long these jobs lasted.

The average production job lasts 23 days, Zin said. If each of these jobs lasted 23 days, the work created is equivalent to around 216 full-time positions.

“That may actually overstate the amount [of jobs created],” Zin said, because it assumed every hire works the whole 23 days — an extra or makeup artist may have worked less.”

These jobs are heavily subsidized by taxpayers, Zin said. “The credit ended up picking up 90 percent of the wages of these Michigan jobs.”

Other concerns about the program include: Michigan’s film incentive does not require that jobs be filled by Michigan residents and the program is uncapped, meaning that there is no limit to the amount of money the state could spend reimbursing filmmakers.

A recent study of Wisconsin’s film program, conducted by the state’s Commerce Deptartment found that film incentives were 20 times less effective at creating jobs than other state economic development programs.

The Commerce Department warned: “It takes 365 Wisconsin residents working for one year, to generate enough income tax revenue to subsidize one Hollywood director who comes to Wisconsin to work for two months.”

Filmmaker Michael Moore, whose Michigan-made film “Capitalism: A Love Story” opens nationwide this weekend, told Michigan Messenger recently that he is not sure yet whether his production will apply for the film credits.

“I am under pressure from the studio to do this,” he said.

Moore said that he had personally trained a dozen people in film related work during the 18-month-long production of his current film and said he was unaware of recent criticism of the state’s film incentive program.

“If it’s not good for Michigan,” he said, “Michigan shouldn’t do it.”