Louisiana Economic Development Secretary Stephen Moret suggested there’s a need for changes in the way the state doles out incentives to lure the movie-making industry here.
Moret stopped short of calling for an outright cap or offering any specific suggestions for reining in film tax credits during a budget hearing Thursday, but the topic dominated most of the discussion on LED’s budget.
“It generates a lot of results, but it’s very expensive,” Moret told lawmakers, fielding several questions from them about the increasing size of the program and its costs to the state. “I definitely think it would be constructive to make changes.”
Such changes aren’t a part of the budget recommendation Gov. Bobby Jindal’s administration has proposed for the fiscal year that begins July 1.
Moret, who is leaving his position as Jindal’s key economic development adviser in May to lead the LSU Foundation, cautioned that altering the film tax credit would not be a panacea for the $1.6 billion shortfall Louisiana faces in the coming year.
“You need to look at the whole picture,” he said, but he didn’t shy away from discussing its pitfalls.
Louisiana’s lucrative film tax credit program generates about 20 cents in state tax revenue for every $1 the state hands out in incentives.
“It definitely represents a net loss in revenue,” Moret said, noting that most other incentives generate more than the state pays out.
The Jindal administration has been critical of the film tax credit program in the past, and the governor showed he’s at least open to changes in tax credits in the coming year. His spending plan proposes scaling back other tax credit programs by $526 million.
But the executive budget recommendation doesn’t touch film tax credits.
Meghan Parrish, spokeswoman for the Division of Administration, said the administration isn’t opposed to changes in the film incentive, which lawmakers have been increasingly eyeing.
“We are open to working with legislators on tax credits — any of them — if there’s an appetite for that,” Parrish said. “Our budget is just a starting point.”
The tax credits paid out about $240 million last year and about $150 million the year before that, Moret said. Jindal’s budget recommendation includes about a $211 million gap in funding for higher education, which relies on the inventory tax credit scale back. If that proposal falls through, then the hit to higher education would swell past half a million dollars.
“I am not suggesting you eliminate the (film tax credit) program, but I do think we are in a situation today, with the size of this program relative to the challenges you are facing with the state budget, that it is now in direct competition with some other state priorities,” Moret said.
Jindal has been firm in his position that any tax increase would have to be “revenue neutral.” It’s unclear how changes to the film tax incentives would need to be offset to meet his requirement.
The state has no cap on film tax credits. Several lawmakers are proposing legislation that would cap costs and eliminate certain subsidies.
“We hear constantly from people in the building that the film credit doesn’t have a return,” said state Rep. John Schroeder, R-Covington.
Moret said the program has had positive effects on Louisiana.
“In terms of building and sustaining an industry, it’s been a huge success — there’s no question,” Moret said. “It’s brought a lot of attention to our state.”
But legislators, faced with the threat of deep cuts, said they are now weighing how much that notoriety is worth.
“I know it’s good to say we are filming more movies here than anywhere else,” said state Rep. Ted James, D-Baton Rouge. “But that’s not as important to me.”
Moret said both the industry and the state need predictability.
“That’s the most important thing,” he said.
He also suggested two ways that the state could curb fraud and abuse: regulate accountants who audit the film industry and eliminate related-party payments.
“There’s no question that we have faced significant challenges in attempted fraud and abuse and sometimes successful fraud and abuse,” Moret said.