Michigan Yells “Cut” on Film Incentives
July 16, 2015
On Friday, Gov. Rick Snyder (R-MI) signed HB 4122 into law, officially ending Michigan’s film Incentives program effective October 1, 2016. The program, known as the Michigan Film and Digital Media Incentive, partially reimburses (up to 25 percent) eligible production companies for certain expenditures incurred while producing digital media and film projects within the state. According the Michigan Film Office, total spending in Michigan must exceed $100,000. (If you’d like to read more about the program, see the Film Office’s FAQ here.)
The new law includes $25 million in funding for fiscal year 2016. However, $19 million of that is earmarked for debt obligations against the state pension fund, incurred when the fund was used to secure bonds (now in default) for the construction of a film studio in Pontiac which has since gone under, a cautionary tale if there ever was one. None of the $25 million in funding can go to the issuance of new credits, and any funds remaining at the end of the program will be absorbed back into Michigan’s general fund.
We have long warned against film incentives. Along with the more glamourous film crews, film tax credits bring with them a myriad of problems. In 2013, Liz Malm outlined some of the issues with the effectiveness of film incentives:
- Jobs created from production are often temporary and may no longer be available once the company leaves the state to move on to another project. It's highly unlikely that these programs will create a permanent film industry within a state if there wasn't one already.
- These programs don’t pay for themselves by generating new tax revenue from increased economic activity. In fact, most studies find they lose money. See here for some examples.
- The estimates of the economic activity generated by film production should be taken with a grain of salt. As we wrote several years ago, "[a]dvocates rightly point out that one dollar of film spending trickles through the economy and creates more economic activity. For instance, if a film production spends one dollar on wages for a worker, that worker will take that income and spend it in the economy, creating income for others, and so on…But the fact that film productions impact the broader economy is not unique to this industry."
Michigan becomes the second state to end its film program this year, following Alaska’s termination of its program due to budget deficits. Arkansas has also suspended funding for its program in the upcoming year.
A growing number of states are scaling back or even ending their film incentive programs as their ineffectiveness grows more apparent. With the adoption of HB 4122, Michigan now joins their ranks, and it won't be the last.