CO Gov. Hickenlooper’s $3M Film Subsidy Proposal Gets Lukewarm Reviews

On November 1 Colorado Governor John Hickenlooper submitted his proposed State budget request for FY 2012-13 requesting a total of $20.09 billion, of which $7.39 billion is from the general fund. Hickenlooper’s request represents growth rates of 1.7% (342.6 million) in total funds and 3.2% (227.1 million) in the General Fund.

Yesterday the Colorado Joint Budget Committee (JBC) discussed, among other things, Hickenlooper’s request that $3 million in taxpayer money be diverted from revenues for transfer into the Gaming Fund for distribution to the Office of Film, Television, and Media. The funds would be dedicated to “allow for increased incentives (read: subsidies) to attract additional film production activity and create jobs.”

For those unfamiliar, in most states the executive branch initiates the main appropriation bill for the ongoing operations of state government. Colorado, however, has a strong legislative budget process. The General Assembly’s permanent fiscal and budget review agency, the six-member JBC, writes the annual appropriations bill – called the Long Bill – for the operations of state government. There is one chairman, majority, and minority member from each house of the Colorado legislature. JBC also has a full-time seventeen-person support staff.

When JBC reached the economic development portion of Hickenlooper’s budget, it’s fair say they gave his proposal to increase subsidies for filmmakers a lukewarm review. Ed Sealover of the Denver Business Journal reports, “both Republican Sen. Kent Lambert and Democratic Rep. Claire Levy — who are about as far apart on the ideological spectrum as any two legislators — questioned where there are better uses for the money.” Lambert, citing a Federal Reserve Bank of Boston study [available online here] asked, “Is that the best use for that big chunk of money, or is it better to spend it out into other areas?”

This isn’t a new debate in Colorado. Various film incentive (or movie production incentive) bills have been proposed by State Rep. Tom Massey for the last seven years, with his latest attempt coming last year in the form of a 10-cent “user fee” on movie tickets that would have generated revenue for the incentive program. This bill was later amended to allow voluntary donations to the state’s film incentive fund.

At the end of the day, the JBC members are right to question this policy decision. Film incentives are bad economic policy. As I explained in a Denver Business Journal op-ed this summer:

Colorado can and should create an environment that lures new businesses and brings sustainable job growth. But with a $450 million state budget deficit in 2012 expected, handouts to Hollywood are not the answer.

Instead, lawmakers should eliminate the subsidies and regulations that favor industries, creating level playing fields.

By generating an economic environment that encourages competition and entrepreneurship, Colorado will be able to attract companies interested in bringing long-term jobs to the state, and not just movie companies looking to fleece taxpayers and leave town.

For more research on film tax credits in Colorado, see my previous posts here, here, and here.