Report: California Needs to Battle Runaway Production

With production and post-production lured to other states or countries, California has lost thousands of jobs and billions of dollars, Milken Institute says

Production incentives are working, according to a research report from the Milken Institute's California Center — to lure production away from California. But the state could fight back with more of a commitment to incentives.

The report, "Film Flight: Lost Production and Its Economic Impact on California," says the state has lost 10,600 entertainment industry jobs, more than 25,000 related jobs, $2.4 billion in wages and $4.2 billion in total economic output since 1997 due to runaway film and TV production to other states and countries.

With everyone from New Mexico and Georgia to Canada and Germany courting production jobs with tax and wage incentives, it's not only the film/TV industry feeling the pain. For every job created in California's film sector, the report says, another 2.5 jobs are created in other sectors. With runaway production hitting California hard, those jobs are disappearing as well.

Among the report's findings:

— The number of movies wholly or partially filmed in California has fallen sharply, from 272 in 2000 to 160 in 2008.

— California's share of North American employment in the industry has declined from 40 percent in 1997 to 37.4 percent in 2008; that drop is especially noticeable in post-production.

However, the report says, there are positive signs, including the tax credit implemented last year that benefits projects with budgets under $75 million that film in California. But, the report notes, the state's incentive program has more stringent qualifications than other states' and specifically excludes big-budget productions.

The report recommends ways to help California turn the tide, including:

— Designing a two-tier film incentive program, with separate rules and benefits for big-budget and smaller-budget productions;

— Implementing a new digital-media tax credit to attract and retain developers of digital animation, visual effects and videogames;

— Making tax incentive programs permanent, signaling the state's long-term commitment.

The Milken report also analyzes what other countries and states are doing to attract production and post-production business.