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The California economy is one of the ten largest economies of the world and is responsible for 13% of the United States gross domestic product. But not everything is golden as California faces a $16 billion dollar budget deficit for the 2008-2009 budget. That’s not good.

When people think of California, they almost inevitably think of Hollywood. And why not? The entertainment industry, primarily fueled by television and movies, is the third largest industry in California behind agriculture and aerospace. In other words, there’s a lot of money in film and television production and that money is in jeopardy of moving out of the state of California.

Other states are aggressively pursuing film and television producers by offering generous tax credits and rebates and other production incentives. Michigan just passed the most generous film and television production incentives package in the country. New York just upped their production incentives. So did Massachusetts. All of these other states are now competing for Hollywood’s production dollars.

Now take a minute to think about your average big budget film. A big event movie like Iron Man or Speed Racer can easily cost over $100 million. That’s a lot of money. And if another state like Louisiana or New Mexico gets that production, than that’s money that California is not getting.

Now let’s look at television. The average sitcom or drama costs several million to produce for each episode. Let’s say for argument’s sake that the average show costs $2.5 million an episode. There are between 22-24 episodes in a full season. That’s $55-$60 million per television show that gets pumped into the local economy. That’s a lot of jobs for Californians and a good base for tax revenue. You can imagine the impact to California’s economy when a big movie or television show moves to another state.

More and more movies and television shows are leaving California and rightly so because production money goes a lot further in other states with good production incentives. Terminator: Salvation starring Christian Bale is shooting in New Mexico. Want to guess why? How about a 25% refundable tax credit for qualifying local spending. On a big budget movie, that’s a lot of money the producers are saving. The ABC show Ugly Betty is moving production to New York. Why? Because New York just upped their refundable tax credit to 30% of qualifying local spend.

What about California? As the Moose has already lamented, California’s production incentives are laughable at best. Producers would be stupid to film here when they can be getting 20%, 30%, 40% of their money back just for filming somewhere else.

The Los Angeles Times reported that the move of Ugly Betty to New York will cost two-thirds of the show’s 150 crew members their jobs. It’s also the first of what is sure to be several television shows that leaves California. The disgruntled crew grouped together to take out an ad in Variety appealing to Governor Arnold Schwarzenegger to help stop the hemorrhaging of work to other states.

Govenator

Governor Arnold Schwarzenegger, no stranger to filming himself, addressed the issue by saying, “What happened was productions that shifted to other states, didn’t come back to California; they went to Louisiana, they went to Florida, they went to New Mexico because they give great tax incentives.” He insisted that that the Democrat-controlled California legislature get with the program and offer tax incentives to keep productions in California.

Most producers, I think, would prefer to shoot in California because they live here. Their families live here. And California has the infrastructure and experienced crew base to offer the best production value for producers if they shot here. The problem is that the aggressive tax incentives of other states outweigh the positives of shooting in California. Governor Schwarzenegger needs to press the issues and get competitive tax credits and other production incentives if he wants to keep California as the epicenter for the entertainment industry. They don’t need to be the best incentives. Just competitive. Can Arnold save California from runaway productions? I hope so. I don’t want to have to move to New Mexico.

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