Calif. tax-credit plan still in limbo

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The state Senate on Wednesday will resume deliberations on a state budget that sets aside $75 million in film and TV production incentives — with even that modest tax-credits provision causing sharp controversy.

A bipartisan coalition in the Assembly approved the $146 billion budget plan in a 56-23 vote at 4 a.m. Friday. But no Republican voted to approve the budget in the Senate's initial rejection vote, and Senate Leader Don Perata, D-Oakland, characterized the incentives component as "dead on arrival" and "an irresponsible action taken in the dark of night without any debate."

His office estimated that the incentives would cost the state much more in lost revenue than provided for in the budget plan. Perata asked Minority Leader Dick Ackerman, R-Tustin, to deliver a GOP-approved plan when the Senate reconvenes.

Assembly Speaker Fabian Nunez, D-Los Angeles, who co-authored a failed incentives bill in the last legislative session in Sacramento, defended the tax-credits plan included in the budget in remarks posted to CaliforniaProgressReport.com.

"I'm not a huge fan of tax credits, but I do recognize the argument these credits can prime the pump for economic benefit to the state," Nunez wrote. "And the money spent on them — which the Republicans would never have pumped back into the social programs Democrats would prefer — seems more acceptable than just paying back Wall Street investors even earlier and would certainly have a more positive impact on the state than accepting across the board cuts as Senate Republicans proposed."

Gov. Schwarzenegger, who has had little involvement in crafting the budget, urged senators to end the impasse on the budget that is already three weeks overdue.

"The budget passed by the Assembly is a budget the people of California can be proud of," Schwarzenegger said Friday. "It takes the operating deficit down to $700 million — and more after I use my blue-pencil authority."

Assembly Majority Leader Karen Bass, D-Los Angeles, who jointly authored the production-incentive bill AB 1696, had been optimistic about the budget's passage Friday.

"We're in a very good situation," she said. "We put the contents of (AB 1696) into the budget. We funded $75 million for (nonrefundable) tax credits to prevent runaway production. Five million of that $75 million goes for commercials and the $70 million is for films."

Schwarzenegger has said that he favors crafting appropriate film and TV production incentives for California to stem the tide of runaway productions lured from Hollywood by lucrative programs offered by states including New York, Louisiana, New Mexico and others. But such a bill has yet to reach his desk.

Assembly member Paul Krekorian, D-Burbank, who also has pressed incentive proposals, said last week that he has been educating lawmakers throughout the state on the entertainment industry's economic impact beyond Southern California.

"The film and TV industry and ancillary industries employ a quarter of a million Californians (producing) $17 billion in revenue," he said. "Those are just the folks that are directly employed in the industry. It's certainly in the millions when you consider the number of Californians throughout the state who are dependent for their livelihood on the industry."

Although the Senate is scheduled to reconvene midweek, the Assembly has adjourned until September.

Lauren Horwitch is news editor of Back Stage West.
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