California Debates Removing Its $750 Million Film Cap

California lawmakers opened a Thursday hearing on removing the state’s $750 million cap on film and television production incentives. A handful of state lawmakers heard testimony from union leaders and industry advocates at an Assembly committee hearing in North Hollywood. The witnesses argued that doubling the program had not stopped production jobs from leaving California.

California doubled the film and television incentive program last year, raising its base credit from 20% to 35% and its overall cap from $330 million to $750 million.

Can a qualified project still get a credit?

California’s program requires projects to apply during periodic windows and then compete with other shows on a “jobs ratio” score, which can determine whether a qualified production receives support.

Betsy Beers, creative partner of Shonda Rhimes, said she had hoped to shoot a new “Grey’s Anatomy” spinoff in Santa Clarita. The show is set in West Texas. Beers said it did not receive a California tax credit after failing to score highly enough in the jobs-ratio system.

When ABC tried again in the fall, the incentive program was already oversubscribed and had stopped taking applications.

“We lost a lot of time, and a lot of money, and now we are filming in Albuquerque,” Beers said. “We want to be here.”

Takeaway: A higher credit cannot assist a project when the application window has already closed.

Would an uncapped credit change the competition?

Arlen Valdivia, the Motion Picture Association’s vice president of state government affairs, said: “The program is still not competitive or predicable enough to address the loss of production to other regions. There needs to be more done to make California competitive.”

FilmLA, the permitting agency, reported last week that production volume continued to fall in the Los Angeles area even as the share of scripted television shows receiving a state subsidy nearly doubled.

Several speakers called for eliminating the $750 million cap. They said the ceiling leaves producers uncertain whether they will receive a credit.

Georgia’s credit has no limit, while New York can draw on allocations for future years, a mechanism that also amounts to an uncapped credit.

Rick Chavez Zbur, who chairs the Assembly Select Committee on Growing and Retaining the Creative Economy in California, expects improvements in the next legislative session.

“I want to try to do our best to make whatever changes we can, and I think either increasing the cap or eliminating it,” Zbur said after the hearing. “But you know that is a heavy lift. But we’re going to try this year to make as much progress as we can.”

Lawmakers are also dealing with a structural deficit and deep cuts to Medicaid, which have intensified competition for tax dollars.

Takeaway: California retains a $750 million ceiling while Georgia and New York allow uncapped credits.

What return can lawmakers measure?

Zbur floated the idea of “dynamic scoring,” which would account for the benefit generated by film credits instead of only the headline cost. He said the method would help persuade lawmakers that an unlimited credit merits investment.

“The way we’re looking at the return needs to be what we’re focused on,” said John Harabedian, another member of the committee. “It becomes a regional fight. It becomes a best-use-of-a-dollar fight… The numbers are going to convince our colleagues that don’t necessarily live in L.A.”

Rowan Isaaks, an economist with the state Legislative Analyst’s Office, cited research showing that film credits return 20 to 50 cents for every dollar invested by the state.

He also questioned dynamic scoring. “It’s subject to a lot of uncertainty,” he said.

“The higher credit might mean fewer projects overall,” Isaaks noted. “There’s a possibility that the more generous our credit is, the fewer productions we can fund in total.”

Stephen Cheung, president of the Los Angeles Economic Development Committee, cited his group’s research, which found a $1.07 return to state and local coffers. The Motion Picture Association funded the report.

Takeaway: The estimates range from 20 to 50 cents for the state to $1.07 for state and local coffers.

Which productions and costs would qualify?

Assemblyman Nick Schultz and other lawmakers put forward three proposals to broaden and extend California’s production-incentive program before the state reaches its scheduled 2030 sunset for film and television projects.

• Extend the incentive’s expiration date, currently set for 2030, to give productions more certainty.
• Subsidize above-the-line costs, including salaries for actors and directors.
• Open eligibility to commercials and game shows.

“Why should we be picking and choosing?” he asked. “Why should we be picking winners and losers? Let’s incentivize all of it to stay.”

Since Gov. Gavin Newsom expanded the state incentive last year, lawmakers have added measures supporting additional stages of production.

• A $10 million incentive for post-production.
• A bill expediting studio rebates and exempting credits for independent films from a $5 million credit cap.

Takeaway: A broader program would cover more work while placing greater demand on public funds.

Would a federal incentive solve California’s problem?

Congress is considering a 20% nationwide incentive, but speakers warned that California would still face stiff competition from other states even if the federal measure passes.

“We should not assume the work will return because federal policy changes,” said Lindsay Dougherty, leader of the Hollywood Teamsters.

Takeaway: The coming legislative session will test whether California can retain work even if Congress approves a nationwide incentive.