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California lost $3 billion in film crew wages from 2004 to 2011, report says

On Location

September 18, 2012|By Richard Verrier
  • Angie Harmon and Sasha Alexander in TNT TV series "Rizzoli & Isles," which received a California film tax credit.
Angie Harmon and Sasha Alexander in TNT TV series "Rizzoli & Isles,"… (Doug Hyun )

California lost $3 billion in wages from 2004 to 2011 because of film and TV production flocking to other states and countries, a new study concludes.

Burbank-based Entertainment Partners, the industry’s largest payroll service company, which specializes in advising companies on how they can take advantage of film tax credits around the world, says its own research has found that California lost 90,000 jobs and saw its share of overall production wages in the U.S. decline 10% during the period as film producers took their business elsewhere.

About half the lost wages went to New York, Louisiana, New Mexico, North Carolina and other U.S. states that offer film tax credits and rebates -- states that added 45,000 production jobs during the same period. The other half of the lost $3 billion went to Canada, Britain and other foreign countries, according to the report.

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The research also found that California’s share of total production wages in the U.S. fell from 68% in 2004 to 59% in 2011. During the same period, the share of production wages accrued by all the other states rose from 32% to about 41%.

While there have been several other studies documenting the toll of so-called runaway production, this is the first in-depth analysis of its kind from a private payroll service company. The employee-owned company handles payroll services for about 250,000 employees on film crews, including 140,000 in California, making it one of the state’s largest private employers. The company advised more than 2,000 production companies last year.

The findings were based on Entertainment Partners’ own detailed payroll data, which track where productions and crews are working. The data were extrapolated for the industry as a whole, based on the company’s market share, said Markham Goldstein, CEO for Entertainment Partners. The data include wages paid to both above-the-line and below-the-line talent that worked on productions and do not include wages paid to companies that provide support services, such as visual effects and film equipment.

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“When we’re talking to our clients and consulting with them, they are making decisions not to shoot in California because of the incentives offered elsewhere,” Goldstein said. “People’s decision making today is very different than it was seven or eight years ago.”

The findings were recently shared with representatives of the Motion Picture Assn. of America, the state’s finance department and the office of Gov. Jerry Brown, who is weighing whether to approve bills that would extend funding for California's film program two more years. The state sets aside $100 million annually to qualified productions under a program that is due to expire next year.

Goldstein noted that his company’s research also shows the California tax credit has had some effect in slowing the job losses and migration of film work since it took effect in 2009 and that California would see an increase in employment if the credit was expanded.

“If California does not extend the credit, there will be more lost productions to other states and jurisdictions,” he said.

The results come amid ongoing debate in Sacramento and elsewhere about whether film production subsidies are worth the investment in public dollars. The nonpartisan legislative analyst's office recently produced a report declaring the proposed credit extension a net loser and that claims of job growth are overblown.

The MPAA, industry groups and labor unions have argued that tax credits should not be judged by short-term revenues alone, and that the state program is necessary to keep California competitive with at least 40 other states that offer incentives.

Vans Stevenson, senior vice president for state legislative affairs for the Motion Picture Assn. of America, said Entertainment Partners’ findings underscored the need for preserving California’s film incentive.

“Entertainment Partners' data shows definitively that the production tax incentives have helped to stem the flow of jobs and wages out of California, and that the incentives are vital to California's competitiveness,” he said.

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