News Story

Star Struck: Why States Chase the Film Industry with Subsidies

While economists on the right and the left say they shouldn't

During the Legislature’s recent lame duck session, lawmakers bypassed an opportunity to put Michigan’s film subsidy program to rest. Instead, both the House and Senate voted overwhelmingly to extend the program through 2021.

In spite of one independent study after another demonstrating that state film subsidy programs are bad investments, the practice survives in many states. In Michigan, the program did more than squeak by when the Legislature took up Senate Bill 1103. Of the 148 legislators who voted, 107 – or nearly three out of every four – voted to keep it going. Only 41 voted to let it die.

Bob Tannenwald, an adjunct lecturer at Heller School for Social Policy and Management at Brandeis University in Waltham, Massachusetts, authored a study on state film subsidies four years ago when he worked for the Center on Budget and Policy Priorities (CBPP). The Center is a think tank that analyzes the impacts of budget policies from a progressive viewpoint. A key finding in that CBPP study was that “state film subsidies are costly to states and generous to movie producers.”

Michigan Capitol Confidential interviewed Tannenwald. He pointed out that his duties at Brandeis aren’t the same as they were at CBPP, but his opinion of state film subsidies hadn’t changed. The following are excerpts from that interview.

CapCon: In their five years of existence Michigan’s film subsidies have cost about a half a billion dollars and there are currently less film jobs in the state than there were before the program started. Is that similar to what you’ve seen in other states?

Tannenwald: In some states where tax subsidies were put in place the number of jobs in the film industry have grown. But to me the issue is a state gets a very small bang for the buck when you measure the number of good jobs these programs typically produce against the amount of money spent. The cost per net job for those who reside in the state can be in the high five-figure or even the six-figure range.

Another way to look at that would be that a state might be getting only 50 cents or 75 cents value for each dollar per dollar of personal income created by the program for the state’s residents. A state might be better off just sending the checks out directly to its residents rather than creating the program.

CapCon: Would it be safe to say that this is one issue that doesn’t seem to fit into usual mold in which fiscal liberals say one thing and fiscal conservatives say the opposite?

Tannenwald: I’d say film subsidies have been widely criticized by researchers from across the spectrum. Almost everyone who has studied them has reached the conclusion that they aren’t a cost effective way to create jobs and income. I previously worked for what is generally considered to be a liberal organization. The conclusions we reached there were virtually the same as the conclusions reached by conservative organizations, such as the Tax Foundation.

CapCon: There are some studies that claim film subsidies pay off. Is it fairly safe to say most, if not all, of those are studies were done on behalf of the film industry?

Tannenwald: That may be a theory worth exploring.

CapCon: Even though these film subsidy programs have been criticized across the board and shown to be poor investments of public money, there is a sense that a lot of people like them anyway. Would that explain why states keep funding them?

Tannenwald: I’d say they keep getting funded for four primary reasons. First, the film industry has a strong lobby that is very aggressive. Second, the benefits appear pretty quickly; with film crews showing up and projects getting started. By comparison, seeing the downside – which is that the costs outweigh the benefits – only becomes apparent over a longer period of time. The costs are spread out, less visible. Third, people just like seeing superstars showing up in their cities and communities. They like the idea that these stars and celebrities make appearances at their local coffee shops. They like seeing movies being shot locally, even if it blocks traffic. Fourth, there is a tendency for states to get competitive about the subsidies and the publicity the movies create. Without the subsidies, producers leave and projects dry up pretty quickly and the psychological effect of this competitiveness tends to outweigh the economic realities.

CapCon: So would you say that the fact that movies can be produced in a variety of settings is a plus for the film industry?

Tannenwald: Yes, this is an industry that’s very mobile. It can move quickly to whichever states offer the best subsidies. It is also an industry that needs subsidies because making movies is a risky business, like oil drilling, in which they can’t be sure of success every time. A lot of the movies aren’t hits and turn out to be almost total busts at the box office.

I’d say that turning to the states for subsidies has become a key part of the film industry’s financial plan.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.