How Gov. Jerry Brown Was Convinced to Spend $1.65 Billion on Film/TV Incentives
California's governor got personally involved and agreed to allocate more money than he initially wanted when convinced it would keep and create jobs
After months of keeping his distance from legislation to extend and expand California's movie/TV tax credit program, Gov. Jerry Brown took a hands-on role in working out the final deal that provides $1.65 billion in incentives over five years.
"He took a personal interest in this," says Assemblyman Mike Gatto (D-L.A.), co-author of the bill with Assemblyman Raul Bocanegra (D-L.A.). "He engaged personally, and that's what it took to make the deal."
Brown for weeks has said behind the scenes he would support the bill but had publicly called for less than the $400 million per year that legislators wanted. That amount was an effort to match incentives offered by New York of over $430 million a year.
How was the governor, who is famously frugal, convinced?
"We showed him the statistics that indicated this program really does provide a lot of bang for the buck," says Gatto. "Even if you define this program by its worst enemies, even if you took the data from the naysayers and those openly hostile to the industry, it still indicates that this program has a very fractional cost [compared to the potential return]."
"That's a small price to pay," adds Gatto, "for retaining a large number of good jobs in California. I think that's what moved him finally."
"It's just common sense," said Assembly Speaker Toni Atkins (D-San Diego) in a statement, "when California hosts more production, we get more jobs and more revenue — two things our state can always use."
Among those who helped push the bill through and played a role in the final talks with the governor was Sen. Kevin de Leon (D-L.A.)., who is President Pro Tem-elect of the Senate. "Our conversations with the governor and his staff were long and arduous," says de Leon, "but ended on a high note. Gov. Brown is notoriously tight-fisted with taxpayer dollars, so his commitment to significantly increase the [tax credits] shows just how important it is to secure solid, middle-class jobs for Californians."
The governor was also convinced that five years was better than the four proposed in the draft legislation. It was part of a shift at the last minute to emphasize attracting TV series and TV pilots — including shows shooting in other states and countries.
While a movie gets a one-time incentive, TV series can get incentives year after year. "We wanted to provide certainty," says Gatto. "Television tends to seek that type of stability a five-year program would provide."
Gatto and Bocanegra were involved in a series of meetings over the past week on the amount offered, the duration of the bill and a number of other details — some of which were changed at the last minute.
Sen. de Leon had added amendments when the bill unanimously passed the Senate Appropriations Committee that ended the lottery system as it has existed since 2009 and placed greater emphasis on giving priority based on the number and kind of jobs that each production would create. However, some of the amendments he added were dropped or changed in favor of letting the California Film Commission create the language and rules under which the new law will operate.
Among the changes was the way applicants who over-estimate the number of jobs will be handled. De Leon had added penalties, including revoking incentives, for participants who overestimate the number of jobs. If the estimate exceeded the actual jobs created by 20 percent or more, the proposed amendment would have not only reduced the amount of money set aside for the production but also barred the applying company from seeking money from the state the following year.
The 20 percent rule still applies to big studios that have sophisticated methods to predict the number of jobs created. However, the variance allowable for independents — who often have to make last-minute changes — was increased to 30 percent. The final bill also did away with the harshest penalties on independents so they can't be barred from seeking funds in the future.
De Leon's amendment to replace the lottery system was also modified. It now is a hybrid system that uses "job ratios," similar to what de Leon proposed, to prioritize productions that create the most good jobs.
De Leon's plan to allocate the funding twice a year is intact.
The new bill, which takes effect in June 2015, separates the ratios so that big blockbuster movies, network TV series and small indie movies all have a path toward incentives.
The other key players in the final hours, besides the governor, were Atkins, Senate President pro Tem Darrell Steinberg and de Leon (who becomes president pro tem this fall).
Republicans also got involved – Assemblywoman Connie Conway (R-Tulare County), Assemblyman Scott Wilk (R-Santa Clarita) and Senate Minority Leader Bob Huff (R-Diamond Bar).
"With California's legacy as home to an entertainment industry that generates billions for our state's economy," Conway said in a statement, "lawmakers must do everything we can to lure back these productions and the jobs associated with them."
After years of feuding over the incentives, in the end the agreement was a bipartisan effort as well as a joint effort by officials from Northern and Southern California.
Gatto says another big factor was that the industry got behind the bill and lobbied hard for its passage. He says that mattered.
"It really did," says Gatto. "I think lawmakers up here saw this was a middle-class jobs issue and that a lot of real people were behind it, not just the industry. We're very thankful for the people who came up here."
CORRECTION: This article was updated to include comments by Sen. de Leon and to correct some facts concerning his role in the development and passage of the legislation.