Lights, Camera, Extraction! Inside Hochul’s Plan to Shovel Hundreds of Millions More Into TV & Film Shoots 

When Governor Kathy Hochul issued her 2023 budget plan at the start of February, one line item that didn't make the top bullet points in her press release was her proposed expansion of the state's already-generous tax credit program for TV and film productions. The deets soon enough leaked out, though, and made headlines about how the governor is hoping to:

• Hike the amount of spending that TV and film producers can bill the state for, from 25 percent of production costs back to the pre-pandemic level of 30 percent. Though officially "refundable tax credits," these operate as grants: When the "Murphy Brown" reboot submitted $22 million in qualifying costs for its 2019 filming, for example, Warner Brothers earned a $6.6 million check from the state, regardless of whether it owed that much in taxes. 
• Boost the total pool of state money available from $420 million a year to $700 million a year. (More on that in a moment.)
• For the first time, allow producers to get state money for "above the line" costs for directors and actors with speaking roles—meaning NBC would be able to recoup a chunk of its investment in whatever it's paying to drag Sam Waterston back to his DA desk.

Though Hochul has certainly shown no hesitancy about funneling public dollars to extremely lucrative industries, sending tax money to pay Hollywood actors' salaries is not great optics, as Gothamist's headline writers immediately recognized. But film subsidies have an especially lousy track record, as analysts have pointed out time and again that there's no hard evidence that they do much to boost a state's economy.

"It's sort of settled science—to everybody except the governor of New York," said University of Southern California public policy professor Michael Thom, who has conducted multiple studies of film and TV credits. Numerous states have analyzed how much they've earned in new tax revenue in exchange for subsidizing film and TV shoots, Thom said, and in virtually every case, the public has ended up losing money.

New York state has spent more than $8 billion on film and TV tax credits since it first started offering them in 2004. Past investigations have found no evidence that taxpayers have gotten anything close to a positive return on their investment—and the latest figures don't look much better.

A "cap" that keeps on giving 

Calculating New York's annual spending on film credits is anything but straightforward. Production studios can submit receipts to the state the year after filming is complete, but it can take considerably longer for the state to process them, and the actual payments are then often spread out over more years afterwards. So while "Murphy Brown" mercifully shut down production in 2019, its producers didn't get their state check until 2022. 

One effect of this lag time is that it makes New York's supposed $420 million annual cap on film credit spending a bit of a bookkeeping fiction. Over 2019 and 2020, the last years for which the Empire State Development agency provided records, the government actually approved over $2 billion in total tax credits, more than double what would have been allowed under a strict cap.

The discrepancy, said ESD spokesperson Kristin Devoe, stems from delayed payments: "Credits in excess of the yearly allocation can be applied to the following year." For each year that New York state allocates more in tax credits than it puts in its budget, then, it racks up an increasing debt load to filmmakers that will be paid off by future taxpayers.

No big deal, tax credit enthusiasts say, because for every dollar the state spends on "Shakespeare's Shitstorm" ($66,473 in credits in 2022), it sees that much and more in benefits. Devoe recently told the Hollywood Reporter that New York's outlay of public money "generated over $20 billion in spending and created 57,300 direct and indirect jobs." 

Besides, the argument goes, New York has to keep pace with New Jersey. Since the Garden State hiked its own film and TV tax credit from 30 percent to 35 percent last summer, Devoe said, New York soundstages have seen unprecedented vacancies. ESD provided Hell Gate with a list of 10 productions it said chose to relocate from New York across the Hudson—though some of those dated back to 2019, before New Jersey increased its tax credit.

(New York and New Jersey's credit programs aren't directly comparable: Credits in the Empire State are refundable, meaning you can claim them whether or not you owe taxes; those in the Garden State are transferable, meaning you have to sell them to someone else who wants to lighten their own tax burden. This probably doesn't matter much to you if you're not planning a massive film shoot and wondering which end of the Holland Tunnel to pretend to blow up, but one never knows who's reading Hell Gate.)

As for the source of the state's other numbers, ESD cited Camoin Associates, a consulting firm that it has long employed to issue regular reports on the impact of the film tax credits. And as a peek inside the latest report reveals, the truth is a bit more complicated.

"Gigs" method acting as "jobs"

First off, those 57,000 jobs ESD claims to have created aren't so much "jobs" as "gigs": As a footnote in the report helpfully explains, "A 'job' is equal to one person employed for some amount of time (part-time, full-time, or temporary) during 2019 or 2020." ESD further clarified that if one person is hired for multiple productions during a calendar year, that counts as multiple jobs created. That means that anyone who worked, say, five days working on five separate film shoots counts as five "supported" jobs—in fact, as ten supported jobs, because the report applies a multiplier assuming that each film shoot job creates one additional job when the film worker spends their earnings in the local community.

This, said Kennesaw State University economics professor J.C. Bradbury, who has conducted his own studies of film tax credits, is faulty reasoning. Multipliers are meant to capture the additional impact of money being re-spent in a local economy, but that effect evaporates when it's earnings from only a short-term gig, especially if that film worker then takes the paychecks back to their home state. Bradbury's state of Georgia, he noted, similarly applies a multiplier to spending by film employees, but "most of the people who are getting covered by the film tax credit don’t live in Georgia." "When Laura Linney comes here and films 'Ozark,' she goes back home to wherever she's from and spends her money there," Bradbury said. (He also suspects that film companies are increasingly divvying up single jobs into bite-size chunks in recent years in order to evade health care coverage requirements: "You can see a distinct jump with Obamacare in the number of film jobs.")

Asked how Camoin justified assuming that local stores would hire additional workers to cope with the deluge of new business from a one-day extra spending their $100 paycheck, ESD replied: "The latest Camoin study followed the same principle as the one conducted two years before in terms of how jobs were counted (i.e., same person working on different projects equals multiple jobs). As to the use of multipliers to calculate indirect and induced job creation, the report explains the methodology used in the study but does not describe Camoin's economic model."

Paying for jobs that would exist anyway 

Even more problematic is that the jobs being created aren't necessarily new jobs that only exist thanks to the tax credits. Presumably, some film and TV shoots would still take place in the state if the credits were eliminated—the trick then becomes figuring out how many. When California's Legislative Analyst's Office looked at that state's film credits from 2009 to 2016, it concluded that "about one-third of the film and television projects receiving incentives under this program would probably have been made in California anyway."

Federal Bureau of Labor Statistics figures likewise show a relatively modest rise in film shoots thanks to the credits: Even in the dark days of 2004, when New York had yet to institute film credits and was reportedly hemorrhaging TV and film jobs to Canada, the state had about 47,600 film and TV workers, versus 61,700 at the state's peak before the pandemic. (BLS job figures for 2022 aren't in yet.)

Asked if the state has studied the economic impact of film and TV shoots, ESD cited figures showing that when the tax credit was exhausted in the middle of the 2009-10 fiscal year, the number of TV series applying for the credit fell from 28 in 2009 to 14 in 2010. The Camoin report, however, shows no sign of an overall dip that year, with New York's share of both national film jobs and earnings rising more in 2010 than they had in 2009.

All of this math matters tremendously, because even Camoin's numbers only assert that the state is doing slightly better than breaking even on its film credit spending: $2.15 billion in total state and City taxes taken in from film and TV productions during the 2019 to 2020 span, and $2.07 billion worth of credits handed out, a net gain of only about $80 million.

That's assuming that New York's entire film and TV industry would evaporate without the tax credit, though. If even just one-third of productions would stick around without credits, as California estimated for its industry, then only $1.43 billion in tax revenue over that two-year span was actually attributable to the state subsidy—meaning New York taxpayers actually took an annual loss of more than $300 million. And if three-quarters of all film and TV spending would stay put regardless, as the BLS job numbers suggest, that would mean New York is throwing more than $750 million a year down a hole.

It's figures like these that show why so many economists frown on film subsidies as a way to boost local economies. "There's no doubt in my mind that the Georgia tax credits cause more filming in Georgia," Bradbury said. But the added bump from tax credits, he said, isn't worth it: "It's pretty clear that it's not having an impact." 

None of this has stopped governors across the country from endorsing film tax credits, or legislators from creating and expanding them. Just two decades after Louisiana became the first state to introduce substantial payouts to film and TV producers in 2002, 34 states now pay for shoots to take place within their borders, and the programs generally enjoy bipartisan support. In Albany, film credits have been backed even by usual corporate subsidy opponents like State Senators Liz Krueger and Michael Gianaris—the latter of whom has a major film production studio in his district. (Neither Krueger nor Gianaris replied to requests for comment.)

Less money for schools, more for film shoots

Meanwhile, there's plenty of evidence that the state could be getting better bang for its bucks elsewhere. As Elizabeth Marcello of Reinvent Albany said at a hearing on New York state's nearly $5 billion a year in spending on corporate subsidies on February 9, "Community colleges produce a very high return on investment for public funding and house a substantial portion of state workforce development programs." Marcello continued, "Yet the governor wants to cut state support to upstate community colleges by 8.8 percent to $735 million, while raising the film tax credit by 55 percent to $700 million a year."

Marcello pointed to a 2019 study by the Upjohn Institute that found that investments in community colleges and K-12 education provide more than triple the average return on investment of the average business subsidies. 

Asked if ESD had conducted any comparative economic impact studies, Devoe forwarded a link to a 2019 Deadline article in which the Motion Picture Association criticized Thom's studies in particular as "fundamentally flawed" and funded by the Koch brothers. (Devoe declined to provide further comment; Thom noted that he conducted earlier studies of film credits with no connection to the Kochs.)

Community colleges, needless to say, don't have the deep pockets for lobbying or campaign funding that major businesses like movie studios do. But, said Marcello, that's likely not the only reason the two types of spending get a different reception in Albany.

"I think the campaign contributions are just the icing on the cake," she said. "The cake is that the governor and ESD get to stand up in front of all these people in the film industry and say, 'We created these good American jobs.'"

Or there could be a simpler explanation, said Bradbury: "Politicians love jocks and movie stars. That's just the reality of it."

Main photo by Jeffrey Zeldman.