Louisiana’s generous film tax credit program continues to cost state taxpayers at least four times as much as it generates in tax revenue, according to the latest state-sponsored study of the program.
The study, by LSU economist Loren Scott, concludes that for every $1 in tax credits Louisiana issues to film producers, the state gets back between 18 and 24 cents in tax revenue.
The findings are nearly identical to those in earlier economic-impact studies of the film program, through which state taxpayers cover 30 percent of the cost of any movie made in Louisiana. The Legislature requires that such a study be done every two years.
Perhaps the most surprising finding in the report — though industry insiders had predicted it — was that Louisiana issued about 10 percent less in film tax credits in 2014 than it did in 2013. The drop, from $251 million to $226 million, came after years of steady growth in the program. That decline, Scott concludes, “seems to indicate that the program is leveling off to some degree.”
Because the state does get some return on its investment, the program had a net cost to the state of $171 million last year, the study found.
Scott’s latest report comes amid a state budget crisis that is at least partly rooted in the runaway growth of giveaway programs such as the filming incentive. The total cost of six such programs examined by The Advocate in a December special report shot up fivefold over the last decade, to $1.1 billion.
Two state lawmakers, Sen. J.P. Morrell, D-New Orleans, and Rep. Julie Stokes, R-Kenner, have proposed legislation for the upcoming session that would, among other changes, institute for the first time a cap on the value of the tax credits that could be issued in a year. Morrell has proposed setting the cap at $300 million, which is 20 percent above the program’s maximum cost to date.
Their legislation also proposes some other reforms meant to curb some of the program’s excesses, which have led to repeated scandals. Among the changes they’d make: requiring that the accountants who audit film expenses — a precursor to the issuance of tax credits — be hired by the state, rather than the filmmaker.
Scott’s report recommends making that change, as well as disallowing certain “soft costs,” such as financing fees and travel, from receiving tax credits, as also recommended in a consultant’s 2014 report to the state.
There are some positives for the film industry in Scott’s report. He estimates that the industry supported 12,641 jobs last year, and that those jobs paid an average of $60,114 – roughly 44 percent more than the average wage in the state. However, that figure comes with what Scott calls an “important caveat.” The average includes wages earned by actors, directors and producers, and is thus likely inflated.
“It is a heroic assumption that these monies will actually be spent in Louisiana, since these individuals are typically not Louisiana residents,” Scott wrote. “Inclusion of their salaries in the ‘certified Louisiana spend’ for tax credit purposes no doubt exaggerates” their impact.
Industry boosters have consistently complained that the state’s studies fail to adequately consider the ripple effects of spending the film industry brings to Louisiana. The Louisiana Film Entertainment Association, the leading industry group, is set to release its own economic-impact study before the legislative session that begins April 13, and it will attempt to show the film industry has bigger benefits than other studies have shown.
For instance, LFEA President Will French has said the group’s research has found that at least 14 percent of tourists who visit Louisiana are drawn here by the film program.
Scott’s report says that his analysis takes the broader ripple effects into consideration.
Follow Gordon Russell on Twitter, @gordonrussell1.