Film subsidies: A low return on investment

It was “Hollywood South’s”’ turn to face the Senate Revenue and Fiscal Affairs Committee on Monday as part of the panel’s ongoing review of Louisiana’s lucrative tax exemptions. In the film program, state taxpayers underwrite 30 cents of every dollar spent on movie and TV productions in the state – a scheme that has cost the state more than $1.5 billion over the past decade. While supporters of the program touted the jobs it brings, testimony by Louisiana Economic Development highlighted the low return on investment for taxpayers – only 23 cents on every dollar. According to Gannett’s Greg Hilburn, some senators, looking to fix next year’s $600 million deficit, were not convinced that the ballooning costs were worth it:

“We’re having trouble educating our children and health care is lagging, so how can we look at something that doesn’t have a positive return on investment?” said Sen. Neil Riser, R-Columbia. “We don’t have the money to do this,” said Sen. Jay Luneau, D-Alexandria. “We can’t keep giving this money away.” … Members also questioned the impact of the industry outside of New Orleans and Baton Rouge, where most of the production occurs, but Louisiana Film and Entertainment Association President Robert Vosbein pointed to people like Gray of Shreveport and other examples to dispel that notion. “There is a misconception money is only spent in New Orleans,” Vosbien said. “It’s spread out much more than the general impression.” And then there’s the cache of being known as Hollywood South, the value of which is hard to quantify, [Louisiana Economic Development Secretary Don] Pearson said.

Film industry supporters said a $180 million annual cap on film spending has some filmmakers staying away from Louisiana. Kevin Frey of WAFB has the details:

“It takes us from surviving to being profitable. It’s 25 percent of our business. It’s a big deal,” said Gabriel Markel, who manages Markel Lumber Yard in New Orleans, which sells wood for movie sets. However, ever since the state instituted a $180 million cap on the number of yearly film credit claims starting with the 2015-2016 fiscal year, film industry representatives said the number of films produced in Louisiana has dropped. As a result, owners of small businesses that benefit from the film industry said that they have seen a drop in business.

Fact check: Blaming the credit cap for the decline of the film industry doesn’t hold water. According to the state Department of Revenue’s own figures, the state was almost $75 million under the cap as of April 30, with just two months left in the fiscal year.

Some question need for special session

The choices are clear for the Legislature as it considers the 2016-17 budget: With a $600 million shortfall, they can either fund TOPS scholarships or health-care programs for the indigent, but they cannot do both without new revenue. Gov. John Bel Edwards plans to call a June special session to consider revenue increases. But as The Advocate’s Elizabeth Crisp reports, some lawmakers remain convinced that they can balance the budget through government “efficiencies” and by re-examining spending priorities:  

“Is it fair for us to go into a special session without the tools of knowing what spending efficiencies and effectiveness we should have in place?” said Sen. Conrad Appel, R-Metairie. Schroder is pushing a resolution that would require agency heads to come up with efficiency plans by July 1, which he says could then be used to eye the spending side. … By law, the budget that lawmakers pass this session must be balanced, so they can’t account for money expected in the special session. That means the budget approved will likely contain deep cuts to some programs that lawmakers can try to back-fill if they raise revenue. The nearly $72 million shortfall in funding for TOPS scholarships could be key to pushing lawmakers to come back for a second special session, as lawmakers have resisted cutting back on the popular scholarships that go to roughly 50,000 college students each year. In repeated debates over spending priorities, legislators have said they want to fully fund the nearly $300 million TOPS program.

‘The State of Black America’

The labor market in New Orleans is improving for everyone – but employment gains are coming faster to white workers than African-Americans, which is contributing to widening economic inequality. That’s according to a new report by the National Urban League being released today, which shows that white unemployment in New Orleans dropped from 6.1 percent to 4.8 percent in 2015 while black unemployment fell from 13 percent to 12.6 percent. As Nola.com/The Times-Picayune’s Richard Rainey explains, the 40th edition of the “State of Black America” report makes it clear that the Obama administration has not been a panacea for African-Americans.

Among the League’s demands: universal early childhood education; a $15 national minimum wage; a doubling of the Pell Grant program for college; affordable high-speed internet access for everyone. Not all was negative. There were some important glimmers of hope in the executive summary. African-Americans have entered college at higher rates than before. Access to technology has improved, shrinking the “digital divide” between blacks and whites. Blacks were sent to prison at lower rates than they had in the past. The report is a yearly check on the status quo of racial equality which started in 1976, a dozen years after the Civil Rights Act of 1964.

La. Supreme Court deals blow to local governments

A decision made Monday by the Louisiana Supreme Court could cost the state and its local governments millions of dollars in the coming year. The ruling in favor of a Louisiana corporation will prevent the state from collecting sales tax on some $39 million in the company’s spending. The Advocate’s Tyler Bridges outlines how the obscure case will put even more scrutiny on Louisiana’s tax exemptions and exclusions:

The case centers on what is known as a tax exclusion — a type of tax break that lobbyists have gotten the state Legislature to increasingly carve out in recent years and one that is beginning to draw closer scrutiny from state officials. Companies and their lobbyists favor having a tax exclusion because it puts the burden on the state during a legal challenge as opposed to a different type of tax break — a tax exemption — where the burden is on the taxpayer challenging the state. Transactions covered by tax exclusions are considered to be out of the taxable base, which means legislators have deemed them not subject to sales tax. A tax exemption exempts a taxpayer from paying a tax on the books. Both have proliferated in recent years, thanks to the Legislature. … The ruling means that the state won’t collect about $2.6 million and Calcasieu won’t get about $3 million. In St. Charles’ case, the parish has already collected the sales taxes and would have to refund the money if the courts rule that the Nelson case applies to the other manufacturing companies. … The ruling is “worrisome,” said John Gallagher, staff attorney and lobbyist for the Louisiana Municipal Association. “It’s going to be a ripple effect of being inundated with refunds,” Jeansonne said. “It’s been a door that’s been opened,” said Kimberly Robinson, the secretary of the state Department of Revenue.

Number of the Day

94 – Number of film and television industry projects based in Louisiana in 2015. (Source: The Monroe News Star)