Assembly subcommittee grills proposal to raise California film and TV tax credit to $750 million

Members of the California State Assembly Budget Subcommittee 5 held an informational hearing focused on the governor’s proposal to raise the annual cap on the state film and television tax credit program to $750 million. Administration witnesses, industry groups and unions told the panel the increase is aimed at keeping productions — and the jobs and local spending they generate — in California. Analysts and some legislators cautioned the program’s long‑term fiscal payoff is uncertain and urged benchmarks and stronger fiscal oversight.

Supporters argue the tax credit prevents “runaway production” — projects that move to other states or countries for more generous incentives — and preserves tens of thousands of middle‑class union jobs in crafts such as lighting, set construction, camera, hair and makeup, and post production. Colleen Bell, director of the California Film Commission, said other states and countries have expanded incentives and infrastructure, and California must respond or risk losing market share: “If we don’t compete, we will continue to lose our market share,” Bell said. She told the committee that the program has helped create wages and jobs since its inception and that the governor’s proposal includes a diversity provision in the new program.

Lauren Greenwood, deputy director of legislative and external affairs at the Governor’s Office of Business and Economic Development (GO‑Biz), said the administration is proposing the $750 million cap to restore competitiveness after a decade of increased incentives elsewhere and recent industry disruptions including the pandemic and strikes. Greenwood said the state’s prior changes — shifting from a lottery to a jobs‑ratio competitive selection and adding refundability — should improve California’s standing but “it probably won’t be enough” without a larger allocation.

The Legislative Analyst’s Office (LAO) and the Department of Finance offered different framings the committee considered. Rowan Isaacs of the LAO said the evidence shows film tax credits increase production activity because projects are mobile and financial incentives matter, but the LAO found “weak evidence” that such credits reliably increase overall state economic output once windfall effects and fiscal tradeoffs are accounted for. Isaacs recommended the Legislature treat the program primarily as a program to retain and attract production rather than as a broad economic development vehicle and suggested adopting explicit benchmarks and fiscal oversight if the Legislature expands the cap.

JT Creighton of the Department of Finance said the administration “strongly supports” the governor’s proposal and noted recent statutory changes (including refundability starting July) are not yet fully in effect and will improve competitiveness.

Industry economists and trade groups made opposing claims about the program’s return on investment. Shannon Sedgwick of the Los Angeles County Economic Development Corporation (LAEDC) presented an analysis of the state’s recent program allocations and said the program has generated substantial output and jobs: LAEDC estimated that program‑allocated productions generated $7.4 billion in direct production spending and $21.9 billion in total economic output in the study period, and that state and local governments received about $1.07 in tax revenue for every dollar of credit granted on the projects the LAEDC analyzed. The LAEDC concluded that each dollar of tax credit awarded produced about $24.40 in total economic activity.

By contrast, the LAO summarized national studies of similar programs and pointed to evidence of windfall effects (credits going to projects that would have filmed in‑state anyway) and research from New York and Georgia showing those states recoup a fraction of credits in state revenue. The LAO recommended calibrated, measurable goals for any expansion.

Several legislators pressed witnesses on fiscal tradeoffs. Some members expressed concern about committing large tax expenditures while the state faces budget pressures and other priorities such as housing, research and development credits and affordable housing programs. Assemblymember Alex Lee and others pressed the California Film Commission (CFC) on new diversity, equity, inclusion and accessibility (DEIA) rules that will attach an optional DEIA “uplift” to part of the credit: Colleen Bell said the CFC will require a DEIA checklist in applications, a 30‑day post‑award work plan, interim assessments, and a final assessment, and that CFC has hired a dedicated DEIA manager and will provide technical assistance to projects that opt into the DEIA component. CFC staff emphasized they must design the selection process to comply with constitutional constraints and that projects will be ranked primarily on the program’s jobs‑ratio metric. The new DEIA requirements had not taken effect for projects in the data currently reported to the committee.

Unions, small vendors and other industry witnesses told personal stories underscoring the job impacts of lost productions. Jason George, a SAG‑AFTRA national board member and working actor whose credits include long‑running California series, described taking a production choice to remain near family and said he had colleagues who left California to follow projects. Malachi Simmons of IATSE Local 728 described work‑hour and job losses reported to union pension and health plans and said many members have depleted savings or lost health benefits. Representatives from Teamsters, the Producers Guild, Film LA, Film Commission staff, LAEDC and dozens of union members and small business owners from across California emphasized the local multiplier effects — hotels, caterers, prop houses, rental vendors, and other small businesses that rely on production spending.

Several witnesses urged a post‑production and scoring carve‑out or explicit inclusion of animation/visual‑effects and post production in the program. Multiple musicians and scoring professionals said scoring work has moved overseas and to other states and urged a specific policy tool to retain that downstream work. Independent filmmakers and representatives of smaller‑budget production urged set‑asides or adjusted rules so low‑budget and indie films can qualify under the program’s job‑ratio and minimum spend rules.

Legislators asked for more transparent, auditable metrics and modeling. Some asked the administration to provide the underlying calculations showing how the $750 million cap was estimated to generate the administration’s projected additional in‑state expenditures, qualified wages and jobs. The LAO reiterated the value of defining program goals — for example, whether the Legislature aims to halt a decline in market share or to restore employment levels from a prior benchmark — and recommended clearly stated metrics and sunset or review provisions tied to performance.

No formal action or vote took place at the hearing. Committee members generally agreed the issue bears further study, with proponents urging rapid expansion to arrest job loss and skeptics asking for stronger fiscal guardrails and measurable benchmarks.

The Legislature’s budget committees and floor process will determine whether the governor’s $750 million proposal — and any statutory changes to eligibility, DEIA uplifts, or carve‑outs for post production and animation — advance into law. In the meantime, the California Film Commission and GO‑Biz said they will provide additional financial modeling and program details as requested by members.