Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon and welcome to the Assembly Budget Subcommitee 5 on State Administration hearing. Today we have Hollywood in the House. Welcome everybody.

Before we begin, we want to welcome a new Member who is not able to join us today, but we have Assemblymember Greg Wallis from Riverside, in San Bernardino or Palm Desert, all of those areas joining us. We have several Members who have asked to join our Committee. Assembly Members. They will be coming in and out.

If we have room, we will. Okay, we have a few back there that are going to be taking a peek and we also have other Members for this exciting hearing today, so we will make sure they have time for comments. Before we begin, we'll just give some housekeeping remarks. Today.

Our hearing will focus on the Governor's tax proposal on the California Film and Television Tax Credit, A few housekeeping notes Today's hearing is an informational hearing and is intended to last for no more than two and a half hours. And we know we have lots of guests that like to speak.

If you are going to be giving public comments, those public comments will be limited to 30 seconds. Our witnesses will have five minutes each. This is an in person hearing with all panelists testifying in person. We will take questions from Members of this Subcommitee after each panel. Public comment will be taken at the end of the hearing.

As I said, 30 seconds. If you are unable to attend this hearing in person, you may submit your comments via email to [email protected] my opening remarks are Hollywood is a fundamental part of California's identity. It is where ambition meets artistry, where the magic of storytelling can ignite hope, wonder and inspiration. Through times of hardship and triumph.

People have always turned to the silver screen and the indescribable feeling we get when the lights begin to dim and we go somewhere we have not been before. Okay, we stole that from actress Nicole Kidman.

From the Wizard of Oz to Wicked, a great, great films can lift spirits in difficult moments, offering escape, comfort and the reassurance that even the most impossible obstacles can be overcome. Hollywood has long been part of California's story, and it is clear that its future remains deeply tied to the future of our state.

As we consider how best to support this iconic industry, we know California will always be the home of storytelling and we must ensure that the next generation of filmmakers, writers and creators have the opportunity to build upon that legacy.

Just as important, as importantly, we must recognize the countless crew Members, artisans and technicians working tirelessly behind the scenes, grip and electric teams, set builders, costume designers, and so many more. These are the people whose skill and dedication transform scripts and to the films and television shows that captivate audiences around the world.

As is noted, and you can see we have a full house today and want to get to not only Members questions, but most importantly, public comment so that with my permission, we have additional Members joining us and we will wait for our Members to ask questions after each panel of that's okay. All right.

We are going to get this show on the road, as they say in Hollywood. And we will offer our first panel and that would please join us up here at the Daisy. Welcome. We have our friends from the LAO here and welcome. Please introduce yourself as you make your remarks.

Colleen Bell, Director of the California Film Commission.

Lauren Greenwood, Deputy Director of Legislative and External affairs at Go Biz.

JT Creeden, Department of Finance,

Brian Uhler LAO

And welcome. And, if you'd like to proceed.

Thank you very much, Members of the Assembly. I'm very pleased to be here today to speak to all of you. California has long been the heart of the global entertainment industry. From the golden age of Hollywood to today's streaming revolution, our state has been the home of storytellers, creators and dreamers.

But what happens when these stories, those jobs and those opportunities leave California? Over the last two decades, we've watched other states and countries aggressively lure film and TV productions away with competitive tax incentives. These other jurisdictions have recognized the immense economic benefits of a thriving entertainment industry, and they've acted decisively to attract productions.

The result has been thousands of jobs and billions of dollars in production spending have left our state. The harsh reality is that the global production landscape has never been more competitive. States like Georgia and New York, the U.K. Canada, and countries across Europe, Asia and Latin America are offering aggressive incentives to attract film and TV projects.

And the infrastructure in these regions has grown significantly. California is no longer the automatic choice for production studios, and streaming platforms now have options around the world. And far too often they choose to shoot their projects elsewhere. As they make those decisions, one of the primary considerations is whether they can access tax credits to offset their costs.

Our relatively limited funding and historically oversubscribed program has meant that too often they go somewhere else. Of the productions that applied for but did not receive a tax credit, the state lost 69% of this production spending and the productions took 5.4 billion.

Outside of California, if we don't compete, we will continue to lose our market share and this important industry that has helped to define our state, it's already happening. Since 2004, California's share of national film and television production jobs fell from 65% to 46%. And it is continuing to decline.

That's why our film and TV tax credit program isn't just a benefit. It is not a handout. It is a necessity. And the return on investment delivers for California. This program keeps productions here, ensuring that the tens of thousands of jobs created by this industry, Crew Members, actors, set designers, caterers, drivers, local businesses stay here in California.

Every major film or television show that shoots in California fuels a vast network of workers and small businesses. It's not just about Hollywood. It's about electricians in Burbank, costume designers in Long Beach, Prop makers in the Bay Area, and restaurants in Los Angeles serving cast and crew.

Every dollar invested in this program generates multiple times that amount in economic activity benefiting the entire state. Since its inception, our film and TV tax credit program has generated 29.1 billion in wages and 221,000 jobs with health and pension benefits. And this is more than just economics. It's about California's global identity.

For over a century, the name Hollywood has been synonymous with entertainment. Our state's brand. California as the entertainment capital of the world is invaluable. It attracts talent, tourism and investment. People come here because this is where dreams are made and manufactured through content creation. The red carpets, the studios, the landmarks, they are more than just symbols.

They are powerful economic drivers. Based on research commissioned for Visit California, it's estimated that over the past 10 years, the California film and TV industry has influenced nearly 18 million trips, 51 billion in visitor spending, and 3.4 billion in tax revenue from US and international travelers. Losing production to other states and countries doesn't just mean losing jobs.

It means eroding the very identity that makes California unique. And we're not just competing for the jobs of today. We're building jobs for the future. The entertainment industry is evolving rapidly, incorporating cutting edge technology. These advancements are not just reshaping the way stories are told. They are creating new career paths.

California is home to the world's leading entertainment innovators. And keeping production here means keeping our state at the forefront of creative innovation. If we don't compete, we lose. We lose the productions that should be filming here, the jobs that should belong to our workers, and the dollars spent and the dollars invested that strengthen our economy.

Other states and countries are not slowing down. If we want California to compete and win, we need bold action and we need it now. Additionally, California is committed to making the industry more inclusive. When we launch Film and TV Tax Credit, Program 4.0 this July.

It will include a new diversity provision, further strengthening the work we are doing to promote diverse hiring practices. This ensures that the opportunities created by our entertainment industry reflect the richness and diversity of our communities, helping to build a workforce that is stronger and more representative for generations to come.

What we are here to discuss today is protecting our legacy and securing our future. California has the talent, the infrastructure and the history. Now we need the commitment. Keep the cameras rolling where they belong here in California.

Thank you. And we're going to have Lauren Greenwood go next from Go Biz. And if we can do it under five minutes.

All right, Members, I'm going to be referenced, making a very loose reference to this.

And let me interrupt. We do have other handouts. I believe they're right here if you did not get it. And where are the rest? Are there any out there? They're all right here if you need a handout, even from those in the audience. All right, thank you.

Thank you. Good afternoon, Chair Quirk Silva and Members. My name is Lauren Greenwood. I'm the Deputy Director of legislative and external affairs at Go Biz. As many of you as many of you know, Go Biz serves as the state's leader for job growth, economic development and business assistance efforts.

We also have the California Film Commission in our portfolio. We are proud to bring this proposal forward to increase the film and television tax credit to 750 million to ensure we continue to get our share of the 660 billion media and entertainment industry.

As my colleague noted, since 2004, we've seen California's share of national film and television production jobs decline with significant disruptions these last few years.

With COVID 19 dual strikes and now the wildfires, our program was more than doubled in 2014, and the Legislature's decision to increase the tax credit to 330 million was important in mitigating the industry's contraction here. We also changed the structure of the program from a lottery system to a jobs based competitive application process.

The original objective of this program was to one, stop the bleeding of California middle class union jobs in an industry that has called California home for over 100 years. And two, stop production leaving the state. Our program has historically been oversubscribed, unable to meet demand from productions otherwise eager to film here.

Since 2015, California has lost 5.4 billion and 62,000 jobs to Georgia, New York, Canada and elsewhere. Unfortunately, our total runaway production losses are presumed to be much higher because we are unable to track projects that decide against applying for California's tax credits.

The reasons they may not apply include our program's limited tax funding, the absence of a standalone program for post production or visual effects, and project ineligibility such as being a 30 minute show, unscripted reboots, et cetera.

Your question in the Agenda packet is will the increase in the credit amount be enough to retain the film industry as complex? The administration's proposal is coming at yet another critical inflection point in this industry.

I'll take a minute to share why when we started this program in 2009, no one predicted how much technology would turn the industry on its head. We saw the introduction of streaming services which drastically changed content delivery and consumer viewing habits and caused traditional business industry models to shift.

We also saw an influx of unprecedented investment into content development, oversaturating the market. CVL Economics spoke at our Film Commission Board meeting in June and provided a thorough overview of the past, present and anticipated future State of this industry as well as supporting industries such as visual effects, post production and video gaming. Data shows tax incentives play a significant role in influencing which jurisdictions secure investments in jobs.

Some of our competitive advantages, including union built infrastructure in our highly skilled and trained workforce slide 5 have been adapted and exported outside of the US 100/ state and increasingly global jurisdictions are becoming more aggressive slide 12 with recruiting the film and television industry.

As you can see, the UK offered almost 1.5 billion in tax credits in 2020 with Canada reaching nearly 800 million.

Highlighting a few well known results from these efforts, Wicked, Barbie and Oppenheimer and technology disruptors such as AI and advancements in visual effects, virtual production and cloud based platforms still have the potential to change the way we do business. Lastly, we're seeing an increased competition for consumer attention from non traditional content professional providers.

For example for January, YouTube which the mass vast majority of people watch for free, beat Netflix, Disney streaming suite, Amazon's Prime Video. In terms of engagement. Last year a famous YouTuber signed a deal for an unscripted 10 episode $100.0 million show which is not eligible for our program. There is good news.

While a recent survey of leading production decision makers noted that top filming locations were outside the US California is number six, making it the top preferred location in the us. People want to stay here, work here and live here. The goal of this increased funding is to make it possible.

We work carefully with the Legislature in 2023 to add refundability to our next iteration of the program starting July 2025 and we know this will improve California's competitiveness as we previously were. The only major jurisdiction that did not allow refundability or transferability of tax credits.

Additionally, since 2023, we also published the California Jobs First Economic Blueprint, which is our first statewide plan built with input from over 10,000 local residents and 13 regional plans to drive sustainable economic growth, innovation and access to good paying jobs over the next decade.

This bottom up regional approach told us that the creative economy as film, television and the arts, as well as its companion tourism, are sectors Californians want to keep fighting for. Collectively, we have crafted our program to not only ensure accountability and returns to California taxpayers, but also updated the program to reflect our California values.

Finally, it isn't an accident that California is the birthplace for this creative industry. Our culture of acceptance and openness has long fostered innovation in the freedom of expression. In fact, our early creators came to California and made films speaking out against oppression and authoritarianism.

We have a rich history of this with this industry and we look forward to having continued discussions about securing the industry's future in California. Thank you.

Next we are going to our LAO.

Thank you, Madam Chair and Assembly Members. Rowan Isaaks LAO so I'm just going to start by sort of giving a General overview of the State of the film industry. Then we'll give a quick overview of our economic analysis on this issue and then some considerations for the Legislature when thinking about this proposal and evaluating it.

So the governor's proposal would make California's credit the most generous among states or countries that have a cap on tax credits. New York is currently the highest at $700 million per year, so the 750 would eclipse that. However, there are many states and countries that have an uncapped credit. Because California's program is consistently over subscribed.

We anticipate that this increase in credits will be fully utilized. And more generally, you know, it's been alluded to by previous speakers, this proposal does come in the wake of a gradual decline in California's dominance in the film industry from 54% in 2009 down to 46% in 2023.

And as been alluded to, increased competition from states and countries that have very generous incentives, but also crucially have much lower labor costs as well, are big factors. Additionally, the recent strikes in 2023 put a dent in production activity and the state still not. Has recovered, has still not recovered from that.

All of this raises sort of longer term concerns about the future of Hollywood. You know, although California has a lot of long standing advantages such as infrastructure and a high concentration of skilled workers, other jurisdictions and countries have been Investing in these things, and they're starting to catch up.

So for the deterioration of the state's market share could sort of pose a threat to the competitive advantage that the state enjoys. We want to make three broad points about the economic evidence relating to this proposal. The first is that film tax credits have been found to increase production activity.

And this is primarily because in the modern day, productions are very mobile. Actors below the line, staff, equipment can be moved fairly easily from place to place as long as there is infrastructure. And this means that financial considerations become top of mind when thinking about location decisions.

There is a debate in the literature about how much these tax credits increase production. One of the main reasons for this is what are known as windfall effects, which is where we might give a tax credit to a production that was going to film here anyway.

And so in that instance, you know, that money that is spent by the state does not increase production activity in the state. Annual spending from productions that have been awarded the credit in the last three years has averaged about two and a half billion per year.

When we adjust for this windfall effect, we estimate that the current tax credit increases spending by about one and a half billion per year. Second, we find that there is generally pretty weak evidence that the film tax credit benefits California's economy overall or that film tax credits benefit economies overall in other jurisdictions.

There are two broad theoretical explanations for this finding. The first is that when the state allocates revenues to film tax credits, that revenue could have been used for an alternative purpose. And there's no particular evidence in the research that suggests that film tax credits provide a higher or better use of that money than other potential purposes.

Second of all, increases in film production activity may partially replace other economic activity. So, you know, labor or resources that are allocated to productions receiving a credit may have instead been used on productions that did not receive a credit or have been workers might have transitioned to another industry completely.

So it's not that 1.5 billion is not necessarily all brand new economic activity. The final point we want to make is that state incentives broadly have been found not to pay for themselves. So we want to highlight two recent reports from New York and Georgia, who are our top two domestic competitors.

New York found that they receive or claw back 31 cents in state revenue for every dollar of credit that is awarded. And they state that the credit is at best an economic break even for the state and more likely a net cost for New York.

The State of Georgia commissioned a report as well recently that found that they receive about 19 cents on the dollar in terms of state revenue. So this is a General pattern that repeats itself in the literature.

So, you know, to sort of give a more summary of how we see this issue, you know, we view the film tax credit and the governor's proposal as being a reasonably effective way at increasing production activity in California. However, we don't think the Legislature should consider the credit as a strong vehicle for economic development.

Rather, you should think about it as reallocating the pie towards film industry rather than increasing the size of the pie itself. The revenue losses that are projected by the Administration coincide with the state's expected ongoing operating deficit in the next few years.

And given these deficits, we think the Legislature should be cautious about making new commitments to spending that widen the gap between revenues and expenditures.

However, if protecting the California film industry from external competition is a high priority for the Legislature and an end in itself, then expanding the credit in the short term is a very valid option to consider.

If the Legislature decides to take this route, then we think that more explicit benchmarks or goals for the program would be useful to sort of enable better calibration of the size of the program and also fiscal oversight of the credit more generally. Thank you very much.

Thank you. And much of what the remarks mean that were just given are in this LAO report, now going to the Department of Finance. Any added comments?

Thank you. JT Creeden, Department of Finance A lot has already been said, so I'll just say the Administration strongly supports Governor's Budget proposal to raise the cap, given it's an important industry to the state that preserves and sustains middle class union jobs, something that we want to continue investing in going forward, we think is very important. So thank you and we're happy to take any other questions.

All right. Now, bringing it back to the dais, I see several hands up. I'm going to go with the first one I did see, Alex. Then we'll go next to. I'm sorry, Assemblymember Lee, then Assemblymember Brian here and here. All right.

All right. Thank you, Madam Chair. I want to thank, of course, all of Hollywood for being here today and partaking in this robust conversation we're going to have about the film tax credit.

You know, there was not a unseen parallel universe where I actually did go to film school and I would have actually been in this industry when I was in high school. I thought I was going to do this.

Look, you can go back to my UC Davis days where I started the film club there, where I was teaching people how to write in Celtics, how to make production spreadsheets, how to set dress with our crappy $5 budgets, and how to edit on Final Cut Pro. That's all stuff I still know how to do today.

And so I'm always struck by the incredible work and artistry you do, because I've always thought that politics is like storytelling. It's like filmmaking. There's a big team. Everyone wants to be Director and the superstar. Of course, everyone wants to be that way, just like in politics. But really, it happens when everyone works together collaboratively and.

And the end, the vision, the movie, the product, even the policy you get in the end is not what one singular person ever wanted. It's a collaborative effort together. Right?

And in the same vein of storytelling, I think one thing that's really important for us as legislators is that the real story right now is that we have very hostile Federal Government that is taking away the basic health care and human services of our people in California.

And right now, we are fighting with our own structural deficit, the Federal Government, and we have real hard choices. When I was here two years ago, we had a big surplus and we renewed the film tax credit.

I was in this very Committee, and I remember the same arguments being said that if you don't renew this, we will go away, we will leave. And then in some of the things we're talking about today is we came back, we renegotiated, we said we want more diversity, and we gave the money.

And now, two years later, I'm sitting in the same place where the new program has even started. And now the film industry is asking for 2x that amount of money.

I just want to put it very plainly, is I respect this industry a lot, but when we had a deficit last year, we suspended the tax credits for net operating loss and R and D, which hurt my district pretty badly.

But I think it was for the good of the whole of the state to make sure we supported our education, our welfare services. But it hurt my tech industry area, too, Right?

And so for me to understand why we should double the cap while still suspending the tax credits for my district and the tech industry, which is a larger share of the economy, we have to really have good math and good reasons to think about this. Right?

And so what I'm going to be asking today is really about, like, showing the math and really understanding these issues. I really want to maintain that I have a very open door and open mind, but I really need to see the math and the evidence in these things. So my first question I'm going to ask the Administration.

Is that so you're asking for $760 billion or so at double X amount. Is that going to be enough money? Because you're also from my understanding, opening the pie up to more productions and then there's also conversations about the percentage in which it can be you can present utilization.

So wouldn't you be inviting more more people to cut up the pie for bigger slices and that's you'll be even more oversubscribed.

So my question is if you're already oversubscribed and you're asking for more people to join in and cutting up the pie, won't you have a problem where everyone either logistically doesn't get enough of a pie for it to be worthwhile? So do you think there's going to be more pressure to ask for more money? Is this realistic? That 750 Bill is enough. Sorry, 750 million is enough.

Thank you so much for the question. J.T. Creedon from the Department of Finance on the terms of whether it's enough. In the past couple years we, the Legislature and the Governor agreed to, as you mentioned, a number of substantial changes to the program that we think will make a difference that have not yet taken taken effect yet.

But in that period of time, a lot has changed in the industry and a lot has changed with other states. We've seen increasing incentives throughout the country. For example, New York raised their their film tax credit program from CAP from 420 million to ...

I understand other states and I, you know, I'm not so interested in race to the bottom of their states because it's debatable how much those states are willing to sustain these programs. I'm just willing I'm just asking is if you're inviting more people to slice up the pie. Is 750 million enough?

I would I'm happy to jump in. So from our research, we know that 69% of applicants who apply for our program leave for other states. And I think with the increase we'll definitely be able to accommodate more projects, but it probably won't be enough.

But we still will be able to foster more jobs, more infrastructure, our skilled workforce so that we can make a dent and stop the bleeding of jobs, which is important. And a lot of our colleagues and small businesses are suffering because we currently are seeing a decline in employment right now.

Right. And you know, I think a large part of this is the job retention aspect of it, which I hear often from the studios and from our labor unions. But LAO, you talked a bit about in the report about how we should probably do more benchmarking because I think ultimately goal of the Legislature is to retain more jobs.

But it's not an explicit part of this program about like quantity or numerical of jobs or how we do more productions because arguably if we just did serial TV shows filmed on a soundstage, it's more jobs in a prestige like Oppenheimer even, right. Like doing one movies at a time.

So can you talk a bit about, like what in your report you're talking about benchmarks and what things the Legislature should consider when it comes to benchmarking.

Yeah. Thank you for the question. So in our report, we don't make any explicit recommendations about the benchmarks that the Legislature should adopt, but we do think that, yeah, there is, you know, if we're talking about protecting the industry from further decline, we should quantify exactly what that means.

You know, California's market share of employment and wages is 46% in the US right now. You know, do we want to stop it from declining further? Do we want to get it back to where it was, you know, 10 years ago? You know, these are questions that ultimately depend on the Legislature's priorities, the available money.

But, you know, we're happy to look into, you know, any particular benchmarks or, you know, Legislature thinks are worth looking into.

And I think that's worth thinking about because again, this is a public investment into the industry, a private industry, and we should probably think about what are the outcomes. Do you want more jobs? You want more market share?

Because I don't think this program's ever explicitly had a goal that we're trying to get to no metrics to do. So. So I think that's important to consider. I'll just ask one last question to the and I'll let my other colleagues ask, but to the California Film Commission. Is that.

So you talked a lot about the economic multipliers, right. And you said there are billions of dollars based off tax credit. Hundred thousands of jobs. Are you able to like, share with us how you arrived at those calculations? Because even from the LAO report, it's they're saying, you know, it's much harder to determine these things.

Can you give the Committee some sense of how you got there?

Yeah, well, the LAEDC did a report that found for every tax credit dollar that's allocated through the Film and TV Tax Credit program, it generates $24.40 in economic activity. What I do know, because I have been leading the Commission now for coming up on six years, is our program, it's a jobs program.

I mean, this is a very targeted program based on jobs ratio and qualified speakers. I spend a lot of time with other film commissioners from other states and around the world. And this program is delivering on exactly what it's meant to deliver on.

And that is creating jobs and encouraging economic activity, and it is benefiting so many small and ancillary businesses that support entertainment production here in the state. So that's. This is how the program was structured and it's really working and it's delivering on that.

Right, and I understand that, but is it possible since this is Budget Committee and we deal in math. Right. Can you show us the math of how you arrived at that point? I mean, you don't have to.

At this very moment, we have a job. Thank you, Assemblymember. We have a jobs ratio. And so we take the qualified wages that a project says that they want, that they're going to generate with their production, plus their non qualified wages.

So things that we can't incentivize, so things like above the line talent or Director or some of these higher level positions, and then we take the amount that they want in tax credit and so we create this jobs ratio, which gives us a base jobs ratio. And then there's a number of other things that factor in.

And then from this competitive application process, we select the applicants that give us the most jobs. And so we evaluate the qualified expenditures which are below the line wages spend on local businesses to spend on local governments for permitting, fire Department, Police Department, et cetera, and then our non qualified spend.

And so together with this somewhat complicated formula, it gives us a metric to be able to evaluate.

Sorry, we don't have a copy of that. Can we get a copy of that later? Okay.

Yeah. Absolutely.

I'm going to yield to my other colleagues. Thank you.

Thank you, Assemblymember Lee. All right, next we have Assemblymember Bryan.

Yeah, I have no idea how to make a movie. Like my colleague, his skill set is unmatched. But I do want to thank all of our SAG Members, all of our teamsters, all of our workers who made it up to Sacramento to be a part of this conversation. Your voice is valued and important.

I've got a number of questions for the LAO because I think you've presented a compelling conversation and something I want to dive a bit deeper into. One of the things that you mentioned is that overall, there's weak evidence to suggest that it's a net positive for California as a whole.

If we zoomed in and targeted that could there potentially be significant benefits to places that were sites of production? For example, if a film or a TV series was shot in a low income community and production happened there, could that be a major economic opportunity for that area?

Thank you, Assemblymember. Yes, absolutely. I mean, yeah, it is the case that because the vast majority of current production spending is done in the Los Angeles County, in the surrounding area, the majority of the benefits go there.

But yes, you know, production that goes to other areas, low income areas or areas that don't typically see much production activity that could be a boost to their local economy.

So yeah, I mean there will be, you know, if we do expand the credit, certain areas of the state will benefit more than others or certain areas of state will benefit or in fact, the current film credit has an incentive to film outside of LA County, there's an increase in the percentage of the tax credit you can claim if you do a substantial amount of your filming outside of LA County. So there are some provisions that already sort of incentivize that. Right.

And of course, let me just make a quick announcement. Just. Yeah, we are opening up room 437 for an overflow. I think we have a lot of people in the hallway. You may go to 437 if you want to be able to sit down and view this.

Thank you. I think my colleague raised a good point about expanding the applicants and making the pie bigger. Is it enough? I appreciate Go Biz's answer. It probably isn't enough. And if this were $1.0 billion, I would still be absolutely in support right now.

One of the things, LAO, that you mentioned is that one of the things that you can't quite quantify but that you suggest is that there could be better uses for this money. We can't fully compare the alternatives. Is there any other investments that you can think of that provide as diverse of benefits in terms of jobs?

The benefits that come from the fact that the industry is by and large union jobs. So health care, pension, retirement, production, small businesses that are supported. Can you think of any public. To me, this almost sounds like it is a business investment, it is a labor investment, it's retirement investment, it's a health care investment, it's a dry cleaners investment, it's a catering investment, it's a restaurant investment.

And so I'm just curious, is there any other pots of money that you can think of that, that touch that many ranges of society that the state could be spending its money on?

Thank you, Assemblymember. Well, so, you know, I don't want to make any statements about, you know, specific industries without having the numbers in front of me.

Yeah, it is true what you say that, you know, in addition to the direct jobs, it's not just about jobs created, but, you know, you know, there are other benefits to local economies and, and to giving health insurance to workers that do come from allocating this money and increasing production.

I mean, this is also true of other industries. It could be, instead of manufacturing, we have tax incentives for other industries as well. But in general, we can only look at the objective evidence. And even looking at local, the word multiplier has been mentioned.

Even looking at local multipliers on employment, it's not clear that, you know, the film and entertainment industry has a higher multiplier than, you know, other industries, for example. And so even though there are these sort of, you know, cascading benefits like you mentioned, to investing in these industries, you know, other uses of state money could also have similar, you know, cascading effects.

And, you know, we're not saying that the film, we're not saying that this tax credit, you know, is categorically worse than other investments, but we can't say with good faith that, you know, this tax credit is increasing the size of the economy overall.

No, I appreciate the response and I recognize. And last question, and then I'll yield to my other colleagues. I just. This reminds me a lot of the conversation we have around the Olympics, because when cities host the Olympics around the world, they often lose money. There's one bright, shining example of when that didn't happen.

It's the City of Los Angeles, the 84 Olympics. And so when I think about this as something that may be more complicated in other places for benefits to be derived and expanded, it seems to me like it's an opportunity for us to do it better than anybody else and that we should, because it's our home. And with that, I yield back to the chair.

And thank you to the Members who are already making comments and why don't we say going forward, three questions and then we'll move on. That way everybody gets a chance. And next, I think we're going to Assembly Member Rick Chavez Zbur.

So thank you all for being here. Really appreciate it. And I also want to thank all of Hollywood and much of California here from not only the LA area but across the state. I think the first thing I'd like to sort of say is I was, and I adore you guys.

I think the LAO is an important part of the tools that we have here. To analyze legislation. But I gotta say, I was really disappointed in this report because I actually thought that it was framed in ways that were negative for a program that is so important for the State of California.

And I just look at even how the. How the questions were framed on page one. There's weak evidence that expanding the tax credit would benefit California's economy as a whole. I don't think there's weak evidence. I think there's strong evidence.

We have a report from LAEDC that shows that the tax credit contributed $21 billion in economic output, 110,000 jobs, $24 in economic output per dollar of credit, 8.6 dollars in labor and output contributions, and 1.0 and $1.07 for every dollar that goes in the credit, which means that it pays for itself.

I think the way that this is framed is that you're asking that this program be something that has to meet a standard, that it actually will have a significant impact on California's $4 trillion economy. Economy. That's not the way to look at it. The way to look at it is, is this an important.

Is this an important industry for the State of California to retain, and what do we have to do to retain it? And when you do that, then I think it's a very different set of questions.

And in fact, you know, when you look at sort of some of the things later in the report, you know, another statement, there's no compelling evidence to suggest that film tax credit credits have a positive effect on the size of the state's economy overall. Well, we know that it has a significant effect.

It's billions of dollars of impact. Is there any industry that would actually meet the standard that you're sort of lifting up? And so I think one of the things that's really important is that this is an industry that is widely supported by the people of the State of California, across the State of California, because they understand how important it is.

There was a poll that was done, I think, by one of the industry coalitions that basically showed that 90% believe that this program attracts talent to the State of California, 82% believe that it brings in tax revenue, which has been demonstrated by LAEDC.

81% think that it's essential to California's economy, 79% that it attracts other businesses to California. That's a statewide poll that shows significant support from voters across the State of California. One of the things that I think distinguishes this is that this is an industry that provides jobs across the board from folks with only high school educations.

That had come in through apprenticeships, programs to people across the board. And they're jobs that people want. Want. I mean, there's a reason why every other state and country is actually trying to lure these jobs away.

Because they're jobs that the people of those states want, and they're jobs that people from Southern California want and they want to keep. I can't tell you the number of times.

I mean, I just hope that folks from the area that I live don't see the hearing like this because I think that they would be frankly saddened that our decision makers don't understand how important these jobs are. People have been out of work for six months, nine months.

There was someone at the press conference the other day that had basically gone through an apprentice program, gotten his first job, and has now been waiting for nine months because of this big drop off.

So with that, I guess I wanted to sort of ask what kind of standard do you think we should be setting if it's not that it has some significant impact to a $4 trillion economy?

Thank you, Assemblymember. So, yeah, I'll try and hit as many points as I can.

So I just wanted to say, first of all, you know, we're not making any specific recommendation for or against this proposal, you know, and although we don't find it, you know, we don't think there's evidence for, you know, this sort of overall benefit to the state economy.

You know, we do recognize in our report that this tax credit is an effective vehicle to increase production in the state and therefore bring jobs in this particular industry to the state. And as we say in our sort of conclusions or considerations, it all depends on the priorities of the Legislature.

If the Legislature thinks that increasing the market share and the number of jobs in this industry is an end in itself, regardless of net economic impact, then it can be a justification for this proposal. So that's one point.

In terms of the LAEDC report, we have-- not to get too much in the weeds, although we can, we have some large methodological concerns with that report. We don't believe that that report necessarily reflects the true economic benefit of the program. So there's that.

And finally, you're talking about what would it take essentially for us to say this is a net economic benefit to the State of California.

I just want to highlight one recent example which is the the California Competes tax credit, you know, which we have, you know, we in the past, in the recent past have assessed the literature and the evidence for that tax credit and has been found that actually does provide, you know, good evidence that there's a net economic benefit to the state.

So it's not that we sort of are ruling out the possibility that the California film tax credit, you know, could potentially provide a benefit to the state. We just haven't seen any compelling evidence to suggest it does. But, you know, it's not the-- that it does is not a requirement.

You know, ultimately it depends on the Legislature's priorities, you know, whether it wants to, you know, value providing a net economic benefit highly or low, you know, higher or lower compared to other goals and considerations.

Let's have one question for folks at GO-Biz and for Colleen on the Film Commission. You both have seen the LAEDC report.

The way that I read it, it did calculate based on pretty direct evidence by looking at exact productions that had actually stayed in California in the credit and what the tax revenues and economic output was from specifically identifying real productions that were part of the program.

And that was what they used to to predict-- or to conclude that for every dollar in tax credit we spend, that we bring $1.07 back in to our state and local tax coffers. And what I understood was that was direct.

So that doesn't include any of the other taxes that come in from things like the indirect jobs, the spinoffs, the tourism industry, all of that. So when I looked it, it at seemed like a pretty sound report to me.

The other two reports that were in your-- I looked at those reports from Georgia and New York and they were sort of back of the envelope studies that were not about the California program.

And there's a lot of differences between New York and Georgia, in terms of the fact that what happens in Georgia-- they're actually taking a lot of California workers and making them fly to Georgia in order to sort of do those productions.

So they actually have a lot of they don't retain as many jobs in Georgia as we do here. So you can't use a Georgia study to basically to make conclusions about a California program.

So anyway, I just wonder if you could sort of talk a little bit more about that and how confident that you are about the study--

Assemblymember. And again, it's up to you, but we do have the LAEDC on our next panel, so we could ask them directly if-- Okay, just a very quick response on that.

A high level of confidence that the methodology is sound. And just a quick point on the difference between the California program and the Georgia program. For instance, as I mentioned earlier, just the jobs ratio and qualified spend.

When projects come in and apply to our program, we put together a ranking system. And so we rank those projects with the highest jobs ratio and spend and we take then off the top. And then we often have a wait list. And on that wait list, we don't have enough funding for those projects.

Those projects most often go and shoot elsewhere. So--and in Georgia's program, for instance, they're uncapped, you apply, first come, first serve. Very different than our program.

Alright. Thank you.

Alright, let me make sure we have Assemblymember-- Assemblymember Tina McKinnor, Assemblymember Ward, Assemblymember Caloza on this panel. And then we have two other panels to ask questions as well. Assemblymember McKinnor.

Yes. Hello, Madam Chair, thank you for allowing me to join this hearing today. And I also would like to thank Hollywood and our unions that work there for showing up today.

Madam Chair, I don't believe that we have to choose between retaining and growing good jobs in the film and television industry and increasing the diversity of its workforce. We could do both of them. I'm a Hollywood kid, you guys. I grew up in film and television sets with my parents.

One worked for motion picture, one worked for television. I grew up on the Mike Douglas show, the Jeffersons, and One Day at a Time. And a fun fact about me, I'm even a soul trained dancer.

And so seriously, in 2023, after the Governor, the Legislature and stakeholders negotiated the film and television tax credit, I was highly offended to see the industry respond to a 1.6 billion tax subsidy by eliminating black women from executive position with a number of studios.

Many of these women were involved in their studio's diversity, equity and inclusion efforts, which raises serious questions about their true commitment to diversity, equity and inclusion in the film industry. Look, my parents start working in the 1970s. It wasn't that many black people on the studios then.

I went to visit a couple of years ago, it looks like the same amount of black people still there. And so that's just not acceptable. The film industry must do better and take steps to ensure that those studios which will benefit from these tax credits, also prioritize the hiring of individuals behind the camera that look like California.

While the Film Tax Credit 4.0 proposal builds upon previous work to solidify California as the entertainment capital of the world, it does not include requirements to increase the diversity of its below the line hiring. The California Film Tax Credit 4.0 only requires a good faith effort. And I'm sorry, that is just not good enough.

I am-- I am looking, I support this, I support the film tax credit because I don't want my industry that I grew up in. I grew up in Hollywood. I graduated from Hollywood High. I wanted to stay right here in Southern California.

But as I look at the CFC's annual Diversity Data Program 3.0 overall hired by ethnicity, I see that there's 16-- When we look at the percentage breakdown, you have white 45%, Latino 16%, African American 7%, API, 4%.

And so if folks are, if the studios are looking or projects are looking for that additional 4% of the film tax credit, if they want to apply for this, I want them to show me real, real advancement on diversity and equity. And so when we talk about benchmarks, what I would like to see is those benchmarks.

I would like to see real reporting, which you guys did really better this time. So I did get something, but with this data, no one would get the credits, those 4%, I wouldn't allow anyone to get those credits. But let's see what happens in the next two years or four years.

I think that benchmark, I would like to see that in there and see how you advance those numbers. Thank you.

Let me finish the other folks. Assemblymember Ward.

thank you, Madam Chair. I want to thank all of our presenters as well for helping us walk through today, as well as some of the preparatory meetings that we had coming into this. I certainly learned a lot about the issue. Coming from San Diego, I have a lot to learn about the industry.

But, you know, my love and interest in being able to support this is significantly high and up there as well. And I am, you know, trying to come in a bubble and in a very robust and positive fiscal year, this would be a no brainer.

Of course, we want to make sure that we're using every moment an opportunity to try to meet the headwinds that we're seeing for this industry because it is synonymous with some of the identity of California.

And at the end of the day, ultimately, this is about the jobs and the livelihoods of so many people that are out there and in the audience and those that represent that couldn't make it here to the Capitol here today. And that is absolutely not lost on me as well.

So that, that weighs very strongly as I think we're going to continue this conversation and get more evidence and really try to balance that with other budget conversations that the Subcommitee and the full Budget Committee will be meeting in the coming months as we come to some decision time, you know, in the May or June timeframe.

I, you know, also have a strong reverence for other sectors and other needs that we have in California. And that's where everything kind of comes into the conflict when we're looking at a constrained budget scenario.

My colleague had also mentioned, you know, headwinds and uncertainties that we have for the Federal Government and whether we have a responsibility to try to backfill any of that. Because all of this comes down to you have to make the pie whole. Of course, we have to balance our budget.

And a tax expenditure of this size is not something to just casually give, but we have to very thoughtfully give. And I think to the point that was mentioned, you know, make sure that we're doing so intentionally with benchmarks and goals in mind that help to validate what we're doing in totality here.

It is incredibly valid for the individuals who are going to benefit and the filmmakers and the producers and every and all the other indirect spending and beneficiaries that are going to come from that. Fully appreciate that.

I'm just trying to do so neutrally and in the context of balancing it with other priorities that the Legislature has to consider as well.

This time last year, we were told, I know we had a bill that one of our colleagues, our budget chair actually, had put forward to extend the affordable housing tax credit, the low income housing tax credit, $500 million a year for the next five years.

That was vetoed because the Governor had stated we don't have the money for that. But then a few months later, we see here in January a draft budget that includes an allocation for another $420 million in tax expenditure for this area here.

So that is just a nugget that, you know, I had observed as well that we didn't have the money here and that was the basis for a veto. But now we do have money to apply for a different cause, a worthy cause.

And that's something that I have to keep on balance as well because again, the Governor has zeroed out a lot of affordable housing dollars that we are going to be debating as well before this Subcommitee on not just the low income housing tax credit, but other areas of funding which--

And the low income housing tax credit, by the way, is what housing experts say is these most effective way to be able to make projects pencil out and happen. And we need that affordable housing all across California as well. The R & D tax credit is something that we said last year didn't make the cut, right.

From $500 million down to zero. And we told that industry, which again some analyses are showing, you know, has a 12 fold impact on GDP for California compared to the film and television sector. But that that got a big zero last year.

And so we were retaining our $300 billion, but adding to that another 420 million for 750 million under this proposal. So are we going to-- We told the life sciences industry that last year just wasn't going to make the cut. We just didn't have the money. And everybody accepted that we had to make cuts last year.

But this year is that something because that they're also running at risk for competition from other states and losing those good jobs and that high return on investment.

And so I just leave that as kind of a basis for everything that's going to be coming at us in these subcommittees that we want to sort of keep on balance and do everything that we can to be able to support hopefully this goal as well too. I'm curious, how did the Governor arrive at $750 million?

It feels respectfully like this number just come out of thin air.

The evidence that you provided today was again new evidence and I appreciate that that from your analysis, 69% of jobs under the 3.0 program that were over oversubscribed had left the state and there was a $5.4 billion impact I think you had, if I quoted you correctly, that's these are the numbers that we have to sort of lay on the table and we have to understand.

And then how am I supposed to balance that as a legislator when I'm thinking about some of the other priority areas that we're also trying to be able to recapture and build into the budget too? I wondered if you could answer the question about how did you arrive at $750 million?

Absolutely. Thank you Assemblymember Ward. And just a comment. The film tax credit is also similar to the suspension that we did to the R & D tax credit. So meaning that no one can take advantage of it, there's a cap until we until Department of Finance says conditions are safe again.

And then just another comment on the R & D tax credit. In terms of business tax credits, the film tax credit is only 5% of the entire tax credits available for business. So while it is a significant increase, we still would say-- we have the fifth largest GDP in the world.

And so we have an economy made up of multiple sectors. So we need to do more for housing, we need to do more for the tech industry and we need to do more for the telephone and television industry too.

In terms of the 750, we did run an analysis and I think while our initial calculation was admittedly probably bigger, right, if we were to right size the tax credit. We felt that 750 million would be put us back on the map in terms of being competitive with New York.

There are plenty of other jurisdictions that have uncapped tax credits, including global jurisdictions which you'll see in the slides handout. And then we also estimated we did an analysis and modeling using data from 2014 which includes disruptions from the dual strikes in the pandemic.

And based on the numbers we have today, we would estimate for the additional projects that we would capture with the 750 million, we would see about 13.5 billion more in California expenditures. This includes qualified wages, qualified non-wages, non-qualified spend.

We'd see an additional 5.1 billion for qualified wages and an additional over 77,000 jobs by going to the 750 million over five years.

Thank you for that.

Exactly what I want to hear and I'd love to be able to get that information, keep it on file as we're considering some of these other areas of state funding and tax expenditures as well to be able to best we can try to apples to apples some of these outcomes that we project and is the rationale for approving some of these additional-- this increase to the tax credit.

Representing San Diego, and also somebody that really reveres, I think, my local arts community. You know, we hear often down there that these ideas that we are working on here at the state capitol don't reach all communities. I know some production does head down there, but this is a statewide decision that we are making of significant amount.

And how much of that economic impact is going to Los Angeles County as opposed to other areas of Southern California or the Bay Area for that matter, or the Central Valley for that matter. That's something that's going to be important information because we're taking a decision up here of general fund impact, right?

And concentrating the beneficiary of that in, you know, just a select area of the state or a select number of individuals as opposed to an education fund that goes to all school districts or a health care fund that goes to all healthcare facilities, right. So that's what I'm trying to do.

I know that it's never going to be a one to one probably outcome, but I'd like to be able to see an intentionality amongst the work that we're doing here with the 4.0 program to try to be able to support more regions of the state that can benefit this because the workers are there too, the great jobs are there too.

And then I might segue on that and note that another area that has gotten to my ears are our stage production. So we've got some world class, arguably some of the best in the country, facilities in my district, the Old Globe, La Jolla Playhouse, that send new visual arts and performing arts programs to Broadway.

It starts here, right. They don't get a tax credit and those are great union jobs and those are great actors and those are great--right?

So, you know, is there an opportunity to use this moment, if we're increasing a pie, to think about other areas of visual and performing arts that also want to stay here and they want to very much be here in California and see that as an opportunity as well that, you know, I would argue is related to the industry that we do, the work that we do on film to so directly.

And there is in 3.0, and I'm assuming under 4.0 there's a carve out for independent filmmakers, is that correct?

That's correct, yes.

That's encouraging to hear. I think that's important that this is going to really small and up-and-coming filmmakers who, by the way, do some of the best work on a thin budget and not necessarily to larger studios.

Which tying it back to LAO's report, you know, again, it's difficult to so precisely pinpoint whether or not that allowance, that benefit that we're giving would have necessarily kept that job here or if that job wasn't going to stay here all along were it not to receive that tax credit. It's a very difficult thing to prove.

But as we go forward in this conversation and receive, I think, more information, these are the kind of evidence that I'm looking for to be able to support our Committee's recommendations. Thank you.

Thank you. And we are now at over one hour for our first panel. So we will go ahead and go to Assemblymember Caloza. But Members, remember, we have two more panels after this as well for questions.

Thank you, Chair Quirk-Silva. Assemblymember Jessica Caloza, a newly elected member of the Assembly, proud to represent. Thank you. Northeast LA, East LA and South Glendale. Some of the neighborhoods that I represent are Los Feliz, East Hollywood, Silver Lake, Echo Park, Highland Park.

The reason why I mention these neighborhoods is because it took a lot for me to get here. I had to knock on thousands of doors. And as I was knocking on all these doors during the campaign cycle, I spoke to a lot of people.

Specifically, I spoke to a lot of workers, a lot of the workers, to my surprise, when I would knock at 9 in the morning or at noon or at 2pm in the afternoon, they were actually home. And the reason why they were home is because they did not have a job.

And the reason why they didn't have a job is because of the long standing impacts of all the strikes that have been happening all across LA, all across the state that have had a disproportionate impact in LA, in Hollywood.

And those same workers who have my number and call and text me and email me every week still need our help.

And the reason why I'm looking at the audience is I know that it took a lot for all of you to be here today, especially in the middle of award season in when you should all be celebrating.

A lot of the hard work that you put into some of these films that we're celebrating and some of the things that I found out in watching some of the award shows, even over the weekend, for instance, the Oscars, that none of the 10 best picture films were filmed in California. How sad is that?

That's something that we have to change. Because right now, even though we're talking about a tax credit, Hollywood is in crisis right now. What our workers, what everyone in this room is crying out asking for the Assembly for in the state for, is leadership to help us get out of this crisis.

And so, I would just like to take a moment to reframe. What we're actually talking about is that our entertainment industry needs some serious help. And thank you. And one of the things that I just implore the LAO.

I don't want to belabor the points made to your report when you're looking at whether or not this has a positive impact. But we have so many bills that in the Assembly that we put forth every single year. This is one of the few bills that we're putting forth that actually help generate revenue.

And this is also an industry that when we invest in, is connected to so many other industries, so many other small businesses, so many industries that impact a lot of immigrant communities, women-owned communities.

And so I just implore you all to take another look at this because it does have a serious impact when we're debating this bill because we do look to you for an analysis. And respectfully, I do disagree with your analysis, but I don't have any other questions other than say that I do support the film tax credit. Thank you to all the workers.

Thank you for the comment. Okay. All right. I think we have one last follow up on this panel from Assembly member Alex Lee.

Thank you. Yeah, this is a question specifically for this panel because I want to ask about the, to the California Film Commission. So we have this report of the diversity, right, of how our tax credit translated to jobs. And the diversity right now is not reflective of the diversity of California.

45% of all the jobs I think above and below the line are white, and most of them are to men. And I was looking through a lot of the projects and many of these projects have less than 1% API participation, even though we're 16% of the population.

So I wanted to ask, you know, and this is a conversation we had the last time we were in this Committee talking about trying to implement more diversity work plans, hiring more people of color and hiring more people to join this industry. So that was two years ago.

And I'm looking at these movies that were from the same time period. And of course, as Assemblymember McKinnor put, a lot of diversity DEI officers have been fired by some of these same major industries.

So I wanted to ask is what work is being done to actually implement diversity work plans and what are the outcomes we can expect to see? Because that was from the conversations last time.

Thank you very much for the question, Assemblymember. And I myself am mixed race and I think one of the categories might not be as clear. There's a mixed race category on there and I think it's about 20%. So that I would say the numbers that you're seeing just aggregate probably don't, aren't completely reflective, right, because our racial identities--

Yeah, but these are the self reporting that the CFC gives us.

But mixed race is a category.

I know it's in there, but I'm saying this is the data that CFC gives us.

Yeah, right, right. But I think if you look at up the different ethnicity categories plus mixed race, you might find a different conclusion. But there is a ton of opportunity to improve our diversity in the industry and there's even the business case for diversity.

McKinsey Boston Consulting Group I think we saw, you know, if we increased our, you know, African American representation, Latino representation, we'd see billions of dollars more in returns by doing this.

In terms of what the CFC is doing, we had a very robust conversation with the Legislature for program 4.0 and we're really pleased at the outcome and so thank you so much to the California Legislature. You gave us additional staff support to hire our first ever Diversity, Equity, Inclusion and Accessibility manager.

No other program or film Commission to our knowledge has a position dedicated to this work. So we have a DEIA manager now on staff and she joined us last March and she hit the ground running. She comes as a former producer and she brings significant professional and academic experience to the role.

She helped kick off our 4.0 regulation process and led a months long stakeholder outreach process which included representatives from industry unions and for the first time, DEIA advocates. Through these meetings and formal comment process, we have started certified regulations to move forward with program 4.0.

Productions must first complete a CFC Diversity DEIA checklist with an application for consideration. Once the project is accepted into our program, they have to submit a DEIA work plan that is filed within 30 calendar days of receiving the credit.

After they submit a work plan, they also must submit an interim assessment for the production. Finally, productions who submit an assessment must show that they made the good faith effort to follow their DEIA work plan and receive 100% of that tax credit amount.

In one of the PowerPoints we have, sorry, I don't have slide numbers, but after the DEI tax credit success roadmap, we have explicit things that talk about inclusive hiring, equity, education, industry capacity building. So, so we're very specific per project, what are the actions you're going to take to improve supplier diversity, to improve the representation on your project?

And then our DEIA manager is building a team right now, which again, thank you to the Legislature for providing funding to build her staff to work one on one with projects to have that guided consultation approach to ensure that they're taking the most opportunity to reach those underrepresented communities.

And our projects will continue to report the diversity data that was put forward in program 2.0. And so hopefully, you know, with time we'll be able to see some of the returns on all of this work. But it hasn't started.

Yeah, and sorry, I don't have all the slides you have. You have a lot of great slides in there, but-- So you're saying this work is ongoing right now. So no productions that would have been, you know, basically in your statistics, would it be following this model yet?

Not yet. That is correct.

So none of them are following that. So that kind of leads me to a question of how does the CFC, now with those new regulations with DEI, how do you choose since it's oversubscribed, how do you choose who actually gets these tax allocations?

Because I actually don't know how you pick.

Sure. Thank you for the question. So we need to be very careful, right, with in terms of the California Equal Protection Clause and Constitution and Prop 209. So we want to be very clear that we are not funding projects based on quotas or metrics in order to make sure that we are following the accordance of the law.

So the process of evaluating our applicants is still the same. We'll still have the jobs ratio but-- And it is up to the project, right, whether or not they want to move forward with the opting in to the DEIA credits, otherwise the they'll get 96% of the tax credit allocated. So it is completely up to them.

I understand it's up to them, but you have so many people applying, so how do you choose who doesn't get it and who gets it?

The credits are still based on the jobs ratio. So whichever applicants have the highest job ratio, those will be the ones who will be offered the credit first.

So it's ranked in order of job ratio. So if they're not as sophisticated in the job ratio, then they fall off the list, basically. Is that what you're saying? I'm just trying to understand, since you have so many people asking for the money, how do you choose who's the winners, who's the losers in that way?

Yes. And so, yes, it's the jobs ratio. So that's whoever is bringing us the most jobs in relation to how much spending they're going to be providing California, those are the most competitive applicants, and those are the ones that we select. So it's a numerical consideration.

And from there I'd say, you know, tax credits are really competitive. Most applicants want 100% of that tax credit. So we would anticipate that all of our applicants would be interested in moving forward with the DEIA provisions.

And I'd also note in New York, they have DEIA requirements or-- They have DEIA requirements without any ability to opt in or out. Or sorry, no uplift. We made our program in accordance with the law. And you know, I think we'll find that we'll have high utilization.

And I understand this is just another element where we have explored about the diversity component because one film, Didi that was nominated, was filmed in my district by my constituents as an Asian American movie apparently was declined getting the California film tax credit. So that's something a nugget I want to explore as well.

But I know we're running slow on time, so let's move on to the other one. Thank you, Madam Chair.

Thank you. Thank you to the Assemblymembers that made these opening questions and comments to our listeners and presenters. You know, sometimes questions are tough and it gives people a little anxiety, as some of you may not know, I've been a classroom teacher for 30 years and I know that sometimes pointed questions give even more anxiety.

But know that this is what an informational hearing is about. We aren't voting today. And on the DEIA, I understand that a lot of this program started July-- is expected to start this July, so there is work to do.

I would say as an umbrella comment related to DEI, sadly, in our United States, this exact term has torn communities apart. So whether we're talking about Hollywood or talking about any type of job, we have seen even in media, people now being fired because of this projected DEI hire. So what is DEI? Diversity, Equity, Inclusion.

Why this has become a bad term or torn our communities apart is actually really sad. And we should be looking within ourselves to understand why that is so triggering and why this has now become something that really is used as a wedge issue.

It's used as a us and them and it certainly isn't acceptable that we're even in this place in the United States at this time. So with our own communities, within our own households, we need to really be having more clear conversations about why we're so triggered about this. We want to see all of our communities uplifted.

And sometimes in hiring practices, we need the data to say, you're doing great, just like a teacher would say, hey, you're here. But we really want to push you over here because we know you can do better. And that's what this conversation. So please don't take it personally.

Take this as the new opportunity to embrace one another because we are better as we all rise together. All right, we are going to move to our next panel. Thank you for joining us, those that were here. And we will now be talking about film production in California. Thank you.

And we do want to thank our other Assemblymembers that joined us and are being great listeners. And I know they're going to take back what they they hear when they are ready to make decisions.

And that was Assembly Member Harabedian and Assemblymember Schultz that joined us. Thank you. All right, welcome. And we have the President, Paul Audley from Film LA here. Is it Audley?

Yes, that's correct.

Okay. And Shannon Sedgwick, senior Director from LAEDC and you will tell us what that means. All right, welcome.

Thank you. I'm pleased to be here. Film LA, if you don't know, is a regional nonprofit that manages filming for about 18 cities and several school districts in greater Los Angeles and Orange County.

It has been in existence for 30 years and is very proud to have been the number one rated nonprofit for its DEI program by the San Fernando Business Journal this year. Something that is employee led and Executive sponsored.

We are have deep concerns for the 258,000 plus taxpaying professionals who are directly employed in the film industry in the region and in the state. We will also be talking about the state at large, even though we're based in Los Angeles.

And you have in the room Members of the flicks, which is the film liaisons in California, statewide film offices across, across the state that talk about the impact locally as well. And Assemblymember Ward, you have an amazing guy, Guy Langman in San Diego. I know he's amazing because we trained him. So talk with him. He's terrific.

We've talked some and the California Film Commission gave you some information about some of the numbers. But the reality for us is that what we're looking at is about 20% of the current production that we permit is in greater Los Angeles right now is tax credit funded programming.

We would be without that 20% in an even more dire shape than we are now were that to happen. A recent survey of production executives around the globe have said that we're number six. I know the California Film Commission mentioned that.

I think we should be ashamed of being the number six choice of producers of where to film television. We come behind Toronto, the UK Vancouver, Central Europe and Australia. And by the way, we lost a $40 million unscripted TV show, 1,200 jobs called MasterChef to Australia this year. A devastating blow to our industry and our local economy.

We had a pretty big share of the film and television industry in L. A. We don't anymore. We're well below 50%. We're really looking now at about 18%, 38% in 2018 and about 21% as we move down. There are 120 jurisdictions around the world asking to take our work from us.

And they're doing a better job, offering better Incentives and drawing the work away. And that marks a 39.5% increase in who's offering money in the last seven years. So what's that happened to us? Well, we mentioned that none of the Oscars were made here, the 10 films nominated. It's a smaller pie.

We saw the peak of the time in 2016, and after the major streamers came back, the pie smaller, and our piece of the pie is smaller. So it's having a multiplier impact here in our region. 2024 was the second worst day on record in the last 30 years for filming in greater Los Angeles.

The only worst year was Covid, when nothing happened. And so what we're seeing is a continuous downturn based on this competition, because we're not seeing a continuous downturn in production anymore. So we went down 58.5% of the amount of television we had in just three years.

And that is directly related to the kinds of incentives that are dragging people away from California. You know, you can go to Ireland now and be on a game show, and they actually fly Americans there to do it because Ireland's giving them so much money that they fly Americans to Ireland to be on a US game show.

Same thing's happening with MasterChef. And we're just not competing with that, with the current amount of money that we have in the program in place. So we're also looking at this other phenomenon which is happening. We call ourselves the film capital of the world, and we have been. We've had the most soundstage space forever.

We're about to lose that designation to Toronto and shortly after to Great Britain. And so our stage space has increased at a much slower rate, 27% over the last few years and 100% plus in New York and Britain and Georgia and other places of new, modern, larger stages.

And so we have an issue there that won't be supported unless the work is happening here in order to continue competing. 10 years ago, when we went from 110 to 330, the sort of theme that we talked about was, we need to help the industry thrive in California. The film offices around the state were here.

The unions were here. We set up the West Wings site outside. Makeup artists were here. It was a great day to talk about thriving in the industry. 2024, really talking about the survival of this industry in California. It is at an inflection point that is dangerous. We're seeing a lot of loss that you don't necessarily think about.

And this is sort of that question you were talking about about Return on investment. We look at how much new revenue comes in from these programs, how much new is created. But don't forget what happens now. We've lost the largest costume warehouse. We've lost Prop Houses. We've lost all kinds of things. People aren't working for nine months.

They're doing things like unemployment. They're losing their health insurance. Those companies are no longer paying taxes. One of them had 28 employees. None.

And so while we look at what the tax credit can add to the revenue, we also have to realize failing to support the industry is taking the bottom out of people who pay taxes and businesses who pay taxes to the State of California. And that cannot be ignored. And it denigrates the ability of LA to remain the key Center for having everything, which is its major draw now, given the cost and the opportunity of incentives elsewhere.

So I guess the thing that I'll say, and I'm happy to answer any questions, you have some things from us, including we sent out this lovely piece which has some QR codes which will give you the recent surveys and graphics you can use. They are really important data pieces for you as you look ahead.

Are they over there? And I think we sent them in advance as well. But really, for us, the message is what we need to have is this increase to help with film and TV survival while we look for a revival. And we appreciate your attention and your ability to help us with this.

Thank you. Appreciate. Next under five minutes, please.

Thank you very much, Members of the Assembly. A pleasure to be here with you today.

You want to push the mic up a little bit? There you go.

Is that better? My name is Shannon Sedgwick and I'm the senior Director of the Institute for Applied Economics at the Los Angeles County Economic Development Corporation. I'm here to provide an overview of the economic impact of California's film and television tax credit program.

So for over a century, California has been the heart of the global entertainment industry. However, in the face of aggressive tax incentive programs from other states and countries, California has had to take strategic action to retain and attract film and television productions.

The film and television tax credit program has played a critical role in sustaining our state's competitive edge, generating economic activity and supporting thousands of jobs. Unlike other industrial policies, film and television production does not require a subsidy to support it.

The industry is so mobile and lucrative that other jurisdictions around the globe have been aggressively luring it away from the state. The program was not intended to increase the size of the economy overall.

The film tax credits are intended to stem the shrinking of the economy that would take place place without it in an environment where cost is now the primary consideration in location decisions, economic activity and fiscal revenue related to the industry is realized by the state regardless of where it is concentrated.

Of the 169 projects that received credits in Program 2.79 engaged in out of zone production activities across 24 counties in the state and tax revenue associated with production spending is dependent deposited into state coffers and Fund programs and services statewide.

Our most recent economic impact analysis of the 2.0 program, based on data provided by the CFC found the estimated total economic impact from production's allocated credits generated a total of 7.4 billion in direct production spending, including 4.8 billion in qualifying expenditures, and received a total of 915 million in tax credits.

We analyzed this direct spending and found that with the 2.0 program, California has seen approximately 21.9 billion in economic output and the creation over 110,000 jobs with labor income exceeding 7.7 billion.

And this analysis allowed us to conclude that for each tax credit dollar allocated, total economic activity or output in the state increased by $24.40, labor income, including to the self employed, increased by $8.60, total GDP in the state increased by $16.14 and state and local governments received initial tax revenue of $1.07.

With the proposed expansion of the credit, opportunities do exist to explore changes in the structure which could lead to higher fiscal return. The risk of runaway production remains a serious economic threat. At least 157 out of the 312 projects that applied for but did not receive credits left California to film elsewhere.

The economic loss related to these runaway productions cost the state 7.7 billion in economic activity, 28,000 total jobs and 2.6 billion in labor income. An additional 4.8 billion would have been added to our California GSP and the additional 354 million in state and local tax revenue would have contributed to the program's overall roi.

The existence and the proposed expansion of California's tax credit program is key and is one way of insulating against this trend. California's entertainment sector employs thousands of people across the skills spectrum from set builders to visual effects artists and beyond studio lots.

The industry's vast supply chain helps to support businesses of all sizes across a diverse range of industries. Finally, the economic benefits extend beyond the direct production spending examined in our impact analysis. Film induced tourism, workforce training programs and support for small businesses all contribute to the broader economic value of this industry.

In conclusion, the California's film and television tax credit program delivers substantial economic and fiscal benefits. And expanding the program will help safeguard tens of thousands of jobs, generate billions in economic activity, and keep California at the forefront of the global entertainment industry. Thank you.

Thank you. Did you have. Assembly Member.

Thank you both for being here. I think many Members here are looking at this from the perspective of is this costing our treasury money that we could be using for something else? And so, you know, I had focused on one of the conclusions of your report, which was that $1.07 is generated in state and local tax revenues.

And I think you used the term direct. Was it direct tax revenues which implied that there were other tax revenues that are generated from the program that were not included in that calculation. Can you talk a little bit about what that is?

And I spoke to Steven the other day and was asking him about the multiplier effect, whether it was fair to conclude that the 1.7 is a conservative number. When you start looking at things that were not included in that, those direct tax payments. Could you talk a little bit about that?

Sure.

So when we're looking at the spending that are related to these productions that receive the credit, we look at the qualified spending and even the non qualified spending, and we look at that ripple effect that occurs through the supply chain, and we look at the ripple effect, that next band of activity that's related to household incomes of the workers that are within the industry and its supply chain.

So when we're looking at the $24 in total economic output, that's taking that entire spending pattern and its ripple effect, and that's the total financial flow associated with the industry. When you're looking at your value added, that's your contribution to GDP.

When you're looking at your $7 in return, you're looking at that entire fiscal activity related to those particular productions. Even though that's including that ripple effect, that indirect and induced activity, it's still relatively conservative. And I know LAO has some criticism on our methodology, things that we don't actually include within this analysis.

You have to recognize that this industry, there's an agglomeration effect that exists. Right. So there's a clustering of activity. As you're losing activity to other jurisdictions, inevitably you're going to have these clusters built in other areas that are drawing from our activity.

So what our analysis does not look at is the rest of the filming activity associated with the industry that's not even applying for the credit. That's additional activity. And in our analysis, we're not looking at Quantifying the activity related to the tourism that's also related to film and television production and location filming.

So you know, we hear different numbers that this industry is 200,000 people. I saw one that was 800,000 which I I think is not supported by very much but 200,000 and 110,000 related to the tax credit.

So some of what you're saying is that it's what it's not counting are the productions that are sort of here that are not directly tied to the tax credit.

And so we also risk frankly if we actually don't keep up our sound stages, we don't keep up that investment in the industry, we risk losing some of this some of the other productions that are there and that that actually those also generate tax revenues that are not counted in that $7 cents. Is that accurate?

Yes.

And we are losing them.

I was just add a question related to what you're. Can you kind of give our viewers and yes we have some people who view us from not in the building. Like a very specific example of that.

What Assemblymember Zvera was talking about was very much what I was talking about with an unscripted television show. Not eligible but is eligible in other jurisdictions. So it would not have been included in the numbers that were the $7. But they were producing 40 million a year and 1200 jobs. They're gone.

And so as we lose things and as we begin to lose the support network under the film industry, more and more things find it easier and find better. If we had competed Heavily with Georgia 10 years ago, we probably wouldn't be talking today.

But Georgia has built up everything and built it up well so that it's now a major competitor with us. And it's not taking quite as many people from LA anymore to do that work.

And the other thing that spreads out from this as a specific example, we know that more many of the people involved in the other parts of the arts Assemblymember Ward musicians and others that play in the LA Phil or for the opera Live because they also do film music work and that is being drawn away.

So there's a lot of that stuff.

So when you've got. So part of this is when we're losing a 30 minute scripted to another jurisdiction. That's all tax revenue that we're losing that could come back to the State of California if we. If we actually both increased it and we changed the what's qualified Right. So that.

That would understate it would would for example the building of soundstage the Decision by one of the studios to build new sound stages. That's an independent calculus, isn't it? That's not really tied to the tax credit. Would that have been included. Included in your analysis? No.

So, for example, all the folks from the carpenters and the building trades who are actually banking on the studios to continue increasing their, you know, modernizing their facilities, expanding their facilities, all the taxes that come from that are not included in this. Right. Is that, isn't that accurate?

Yes.

I mean, there's. I just want to point out why to our friends who are concerned about the tax revenue, this is about keeping an industry here that actually has a lot of spinoff effects that are not part of these calculations. And that's why I've sort of felt so strongly about it.

I lived through living in Southern California when we let our aerospace industry slip out from here. And I think it was a big loss. And it wasn't, I don't think has the same, same importance as the. As the film and television industry does, because I do think that the spinoff effects are so much greater for this.

I mean, this is our identity as a state. It's about making sure it's part of. It's our iconic industry. I think losing this is something that I think the California public understands because it's so core to our identity. It would be viewed as a downsliding of the State of California and a reduction in our standard of living.

We would have lost something that is very visible and that people are proud of. But most importantly, as I think Assemblymember Coloza and I know I've talked a lot to Assemblymember Bryan and our chair, we all understand that these are about the jobs of real people.

I mean, I can't tell you the number of times I've had people come to our town halls that are calling our offices and are basically saying, please, please do something for me. I don't know if I can stay in Los Angeles any longer. I might have to move to Georgia. I may have to change.

I might have to change my profession. I'm not going to be able to make the same amount that I did before. And I have one last question. I'm going to turn it over. Are things like the cost that we have for, for paying unemployment, for underemployment and unemployment, are those calculated into these figures?

Because I assume that someone that is not working for a period of time, a lot of these workers and small businesses are able to sort of claim unemployment benefits. Is that accurate or not?

We're not including that in our analysis either, because we're focusing on financial flows and the employment that's associated with those flows of the industry. So the unemployment related to lost productions or slowdowns is a separate piece of the analysis.

So when we're talking about adding $400 million to the tax credit, the first argument I would make is, well, we're returning on a very conservative assumption.

We were turning that back to state and local coffers, but that was also not taking into account the fact that our Unemployment Insurance funds are actually paying people now because they've been unemployed for such a long period of time. So that's another hit to our budget. So, anyway, thank you very much for being here.

Thank you. Assemblymember Bryan.

Thank you. I will be brief. Thank you for the presentation and for the conversation. As a data nerd, I always love when scholars and academics fight over methodology. It's fun for me. You've mentioned MasterChef several times. That was previously at Fox Studios. No, it was in an independent stage, actually. Okay.

So we've got to get it to Fox Studios when they do their expansion. I think Assemblymember Zabura has raised a point just to single out Fox, which is in our district. They're committed to a $1.6 billion lot expansion. A lot expansion that is twice as big as this tax credit is being proposed.

That's a personal investment that they are making in community because of the hope and the reliability that production will stay in California. It's a commitment to doing that.

I think Assembly Members of Burr has raised a very interesting point in the fact that if we don't match the public support in a way that shows that we won't let a struggling industry be stolen from its place of origin, that that kind of productivity by the studios and by the workers who will build those expansions may also leave.

Is that an assumption that you also agree with?

Yeah, I think I was trying to suggest this problem where we have tens of billions of dollars on the books to build new sound stages that are teetering because of the fact that the industry is retracting in L A.

And so that construction part, all of the things associated with that become at risk as we denigrate the ability for L A to be the top place in the world.

So the need for the statement of California as a state to want to say, this is an industry, important, it must be supported, is going to be critically important to those folks who want to make massive financial commitments to continue to support it here as well.

And I just want to point out that we do this with incubating industries all the time. We show a bit of public support to draw in investment. This is not an incubated industry. This is our home. These folks do not want to work in Georgia. They don't want to.

And it seems to me like every dollar we spend, not only does this tax incentive pay back the state and pay for itself, but it brings in other investment, both from the industry and the investments of workers who can now live and thrive in a state that's being characterized as unaffordable. This is a livable wage industry.

We have to hold on to this. And I want to thank y'all for coming. Thank.

McKenner and then Assembly Member Lee.

Ms. Sedwick, you mentioned that project. Some projects didn't receive the tax credit, so they went to other states to film. I was just wondering, give me an example of why they didn't. Did we run out of money? Why didn't they receive the tax credits?

So when we're. When we receive the data from cfc, it just tells us that these are productions and they're kind of anonymized. So I couldn't tell you the details of particular productions that didn't get it. I don't know if you're familiar with any of that.

I mean, most of them would have been assembled. Member McKinner would have been a lack of financial resources to continue spending down that jobs ratio. Thank you. Not all of them, but most of them would have been. Thank you.

Thank you. So the LA EDC report has been, of course, a topic of conversation here, talking about methodology, about data and all this stuff. It's not an organization that I'm familiar with, given that I represent the Bay Area. But who commissioned this study, the study that you worked on?

We've had a variety of individuals that have commissioned the study. Really Nonprofits associated with the industry. The mpa, at 1.0 scag, the Southern California Association of Governments, also funded one of our studies. This is work that we've been doing in this space, looking at runaway production and tax credits. Runaway production, specifically since what, 2005.

And tax credit credit work that we've been looking at their ROIs and their economic impact since the inception of the program in 2009.

Yeah, so you've been historically doing RI impact, and historically that's been. Yeah. Been funded and committed by the industry, usually industry.

And SKAG is a government organization that's invested in looking at key industries within our Southern California.

Okay, that makes sense. And also in the beginning, you talked a lot about the numbers. Admittingly, I'm not a good student, so it's hard for me to mentally follow a lot of math just verbally. So if you could, with the Committee, maybe some of the findings you were talking about earlier.

I'm just very curious in the sense that. So, you know, you're claiming there's an economic output multiplier of $24 per dollar that we spend. But I've been seeing in the LA report and even some articles talking about how in New York they're reporting that their program is the best.

Breaking even in Georgia is saying that they lose $0.81 per dollar that they spend on this program. So I'm just curious as, like, from your perspective, I mean, unless, you know, you think their methodology is wrong too. I'm wondering, like, what makes us different? Why are we so much more productive in doing it?

Because then I would imagine if we had the same. If the same multipliers are true of our program, wouldn't Georgia be reporting similar.

Amounts, sort of apples and oranges here, Assemblymembers. So that the dollar return on taxes, direct tax return in Georgia is very poor, but they report 8 billion in economic output, which would be going to that $24 a dollar a year. So two different numbers. So. So ours is. Sorry, can you explain. So ours is $1.07 return.

Theirs is 19 cents. We have a $24 economic benefit. They're talking about an $8 billion a year economic benefit out of their tax credit program. And New York, in the same way they talk about that, they're doing a $23.3 billion economic benefit in 2023, which was 90,000 jobs and 50,000 small businesses benefited.

So there's a number that is associated with direct tax return from the credit versus that economic impact. And that's why you're saying, what do.

You attribute to that dichotomy then? Why is it their direct recapture so Low?

They have. I don't want to. I'm just trying to understand. Basically, California has an extraordinarily rigorous review of everything that applies. It's an incredibly rigorous review. Many of the other states do not.

The Atlanta Journal Constitution several years ago said that in checking with their comptroller's office, they only even reviewed 1 out of 12 budgets to see if they were real. And so Georgia has given huge amounts of money above, below the line.

And a lot of their money that came in was coming in over the years from out of state workers and out of state vendors, which meant the state, state was not getting a good return.

And interesting, curious, because you're working with these business entities, what is the incentive of a production company to not forge the books or not work in such good faith over there and still get all these tax returns and credits? Why would they choose to do things here when they could be making money over there?

Even if they're not really playing by. The rules, sometimes they don't choose to work here. That's why I'm saying. That's why I'm saying in that environment where it's much easier to siphon off of public funds in a condition where they're not holding account.

I'm just wondering from a business perspective, as you work in a lot of businesses, why don't they prefer to do over there?

They prefer to stay here for the quality of the workforce, the availability of vendor community, the amount of soundstage availability, and the fact that in our state you can be anywhere in the world and film here.

And that's not true in most other parts of the world when you go to a place like Georgia, and so that is the incentive to be here, is that the creative community is here, everything is here.

But when Georgia has no cap on its credit and you just go there and say I want to do it and you'll give me all the money and they aren't able to get the credit here, they're going to go. It's a business decision.

Okay, thank you.

Thank you. All right, it looks like we're going to wind up this panel. I do want to express a few questions I have. I mean, you can see by the questions many of us agree, some of of us don't.

This is a body that whether we have our Republican colleagues, whether we have our Democrat, we don't all agree. And so we have various areas that we work in that sometimes intersect and sometimes they're very different.

So as was mentioned by Assemblymember Ward when we were talking about the Low income housing tax credit, the way I would envision that these worlds intersect is as California struggles in their housing crisis and affordable housing, it does make it harder and harder to retain workers even at a middle class wage because we know the average rent is now 2,500 parts of LA, probably 3,000 for a two bedroom.

With the fires, this becomes even higher.

So one of the questions that, that we have been asked is if we move forward and we have this fully vested tax credit and with support and it makes it across the desk to the governor's desk, how do we predict the future of will we in essence, in the next two years, the next four years, have another request for an additional tax credit?

Can you speak to that?

It's very hard to predict that future. But the reality, I think I've talked about this right at the beginning, if California competes well against these other places, they will drop off. And that happened when we went to 330 million. Some of the states dropped out of the program. North Carolina dropped out, Texas dropped out.

They're all coming back now. And so I think if California is truly the competitor in the world market, a lot of the smaller ones, a lot of the other ones will go away that won't be able to compete with us.

The longer it takes us to do that, the more they build up infrastructure, cast and crew bases, and the harder it will be for us to retain the number one position.

Thank you. Appreciate that. Comment One of when the pandemic hit. I happened to be the chair of the Arts Committee at that time, the arts and entertainment And I know we talked a lot about shutting down. And I represent Fullerton and the happiest place on earth, Disneyland and Knott's Berry Farm, our theme park.

So when we talk about the film tax credit again, how they intersect, of course, is many of the movies that become iconic come out of Disney, so forth. But we did hear from a few actors. And I know next we're going to be hearing from some of the workers in this next panel.

But I remember distinctively and I can't remember which actor it was, so I'm not even going to mention the name. But he talked a lot about why they don't want to go to other states and to film when in fact, if they could work here in Los Angeles, Orange County or in California.

And one of the main reasons that I remember, and this is three or four years ago, was him talking about family and our Hollywood friends who are here, whichever coalition you're from, that's very fundamental.

I think that when we look at an industry as a family, just like we don't always get along right, we have our spats within our family. But the truth is we want to be close to home.

And so when those actors go to do their work or those labor workers go to do work, they want to go home to their family. So that instead of going to a hotel or a lounge bar somewhere in Georgia, they're going home and they're shopping at their local markets, they're shopping at, they're doing sports with their kids.

All of these things that again, we're like each other. You're not different than us. And so I think that place, which is Hollywood is home and we want to be here is a really important message here. So thank you for clarifying that. We're going to let's thank our panel.

Thank you. Thank you very much.

We will be moving to our next panel, which is our workforce perspective. We're going to ask all of you if you can stay under five minutes. And we really love your stories. We want to hear your stories because we know that you are working hard and we want to know what you do.

All right, why don't you go ahead and introduce yourselves in the order you want and tell us what you do.

My name is Jason George. I'm an actor. I'm a SAG AFTRA Member and I'm also in the national board of SAG AFTRA and I'm also the co chair of SAG AFTRA's government affairs and Public Policy Committee.

My name is Malachi Simmons. I'm the Vice President of IATSE Local 728, which are the lighting technicians. And I'm speaking on behalf of the Entertainment Union Coalition today.

Hi everyone. I'm Ashley Hipolytt. I'm the Executive Director of Hollywood Cinema Production Resources. All right, Jason George, Mr. Actor, tell us your story.

That's actually my full name, Mr. Actor.

It actually is, and I didn't notice that, but yes, it is, Mr. Actor.

Thank you Chairperson Quercipa and all of your Committee for giving us the time today. As I said, my name is Jason George. I'm an actor, but I'm also a California resident employed on a long running series shot here in our state. It's a show that sustained tens of thousands of jobs throughout its 21 seasons.

That means those of us employed on Gray's Anatomy have been here in California paying rent and property taxes, supporting local restaurants and retail businesses, and funding our local infrastructure by contributing to state and local income tax revenue.

But right now, more and more films and series are leaving the state for other production locations that offer increasingly aggressive production incentives. That means California is not only losing thousands of jobs, but also one of its signature industries, a major contributor to the economy of our communities.

Before I was blessed enough to be on a long running series based in California, I was on the other side of the coin on a different show that was just starting up in California. When I took that job.

There were other projects that I was much more excited about, projects that would have been much better for my overall career. But each of those jobs shot in different states or in other countries.

The main reason I took the particular job was because it shot here in California and I wanted to wake up with my kids every day. Then near the end of the second season of that show, the producers made the difficult financial choice to move production to Vancouver in order to take advantage of their tax incentives.

Straight up explanation when given to me. All of the crew Members who had been working on the show here in California had to find new work. And I end up doing something that is unheard of amongst actors. I asked to be let out of my contract and leave the show.

We just bought a house and I have never had more sleepless nights than when I suddenly had to worry about paying the mortgage. Because I chose to actually. I chose actually being with my family over financially supporting them.

But you know, look, I'm a military brat and while I'm incredibly proud of my father's service, I'm painfully aware of how much long distance relationships and constantly moving can negatively impact marriages, families, and a child's sense of stability. I was determined to not have that be my family. Fortunately for me, it worked out.

But I have many friends who were not so lucky. They didn't land another job or their families and marriages suffered dramatically. One other anecdote that I think is worth noting from that series. As part of the press campaign for that show, I flew to Georgia to do a national talk show.

It's worth noting, mind you, that Georgia didn't used to have the infrastructure to do a national talk show. As the sound guy was putting the microphone on me, I realized we'd worked together on a sitcom a decade earlier. I said, what are you doing here? And he said, I had to follow the work.

That was 12 years ago. And I've heard the same thing from many other former California workers. How much local revenue could have been generated if that show had decided to make our state its home base for production?

It's also worth noting in terms of diversity that it's many African Americans who considered the move to Georgia from California, as was the case with my friend. And by the way, if you want to see diversity, come check out my show. If you want to see how we're improving diversity in this industry, my show is the definition.

In nature, once ecosystems break down, they can't grow back. The entertainment industry is the stream that so much of California's ecosystem feeds from, directly or indirectly. Tourism, for example.

I can't tell you how many family or friends come to visit me for studio tours before they take a trip to the redwoods or to a theme park or to the Bay Area, Palm Springs, Santa Barbara, San Diego. Now they are our equally dazzling tours for superheroes in Georgia or young wizards in England.

I know because I took my kids to them. They attract people to those states and then to the other parts of those states for other parts of tours, which is exactly what I did with my families.

If we don't nurture California's ecosystem and make sure the entertainment industry stream flows strong, if we don't continue to incentivize TV and film production to flourish here in California, we'll lose sustainable jobs, revenue for our small businesses, tax revenue, tourism revenue, rental income, and real estate values. The list goes on.

Other states and other countries are already building their production infrastructure. And the longer we wait, the harder it will be to bring back the work we need to fight to keep Hollywood in California. Look, no one here is asking for handouts. We're asking for a hand getting back to work.

We're asking for lawmakers to support the industry that has helped California become one of the most powerful economies in the world. So I urge the Legislature to pass Governor Newsom's proposed budget, which includes a much needed increase to the state film and television jobs program. Thank you.

Go home.

We will move to our next witness. But before we do that, Mr. Actor, what role do you play and what do you like about it?

Right. What role do I play on the show and what do I like about it? I've played Dr. Ben Warren for years now on the show.

He's an anesthesiologist who went to school to become a surgeon and then went and became a firefighter when I did the spin off series Station 19 for seven seasons, which again was blessed. And this is the thing I hear from every one of my friends.

You don't know how lucky you are to have to wake up in your own house to go to work every day. Because my colleagues from when Station 19, we just finished last year and I came back over to Grey's Anatomy, only two of the 10 cast Members from that show immediately jumped into other jobs.

And that's over two cycles of what used to be a pilot season which doesn't really exist anymore. That's a really Low number for a relatively hit show that had run for a while. For only two of them to be working at this short amount of time. One in Georgia, the other one in Budapest.

So what I love about my job is that I wake up every day in my bed and see my kids. I love that it's given me the opportunity to expand. And I was directing on station 19 and if Debbie Allen's willing, she'll let me direct on Grey's Anatomy sometime soon. And I love the.

I love that I've seen. Look, I work in Shondaland and when you talk about diversity and you talk about people earning their positions, I've seen people go from literally.

Our showrunner was the assistant when she started and we've watched her grow and she's the encyclopedia of the show, but she knows the show better than anybody and it's $1.0 billion industry. Between you add in the network, the streaming, on two different streaming services, etc.

And it's run by a whole bunch of powerful women of all different colors.

I like that. You can stop there. Thank you. Thank you. Welcome. And we are going to be hearing about iatse.

Well, I'm speaking on behalf of the entire entertainment union Coalition. Okay, thank you. Chair Quicksilva and the Members of the Committee for the Opportunity to speak today. My name is Malachi Simmons and I'm a proud IATSI Member of IATSE Local 728, the lighting technicians and currently serve as the Vice President.

Today I'm speaking on behalf of the 165,000 Californians represented by the Entertainment Union Coalition, the unions and guilds of the entertainment industry. That's 165,000 Members that every day give their blood, sweat and tears literally for this industry. For over a century, California has been the motion picture capital of the world.

Home to the most advanced production infrastructure anywhere. We have the most sound stages per capita, more industry related small businesses and 165,000 EUC Members from San Diego to Northern California. But today, both our industry and our Members livelihoods are at risk.

Runaway productions driven by rising film incentives in other states and abroad have led to major declines in jobs. From 2022 to 2024, the motion picture industry pension and health plans reported a loss of 35 million work hours. That's the equivalent of 17,000 jobs. Gills have seen a 40% drop in productions.

And to put that in another perspective, the average California manufacturing plant employs about 20 people. So that would be the equivalent of shutting down approximately 850 factories in one industry. The past five years have been especially hard. After surviving the pandemic, our industry began slowing down in late 2023. By 2024, production had nearly stopped.

Members adopted the phrase survive till 25, a grim reflection of the industry's struggles. And then the fires hit. Thousands of EUC Members either lost their homes or lives in areas that are destroyed or uninhabitable. While the industry came together to help, donations can only go so far. What people need to rebuild are jobs.

Jobs that provide stability, security and a future. Many Members haven't worked in two years. Families are losing health benefits, depleting savings and tapping into retirement accounts. Seasoned professionals are retiring early, while others are leaving the industry or the state entirely. That's why this incentive is so vital.

It's a jobs Bill and an investment in California families and communities. The program works because the workers and vendors get paid before tax credits are issued. And in July, we'll introduce the strongest career pathways initiative in the world along with the first ever onset safety advisor requirement. These are California values. We've already seen the impact.

The TV series Fallout relocated from New York thanks to the tax incentive. Employing nearly 1000 below the line workers and 149 above the line writers, directors and talent. That's one of a number of major productions that have returned to California supporting not only film crews but also small businesses that rely on the work.

And to the representative's earlier questions on filming in black communities, one of the other shows that came back was Rap Shit on hbo.

And to the other representative's question about API representation, Everything Everywhere all at Once was a film that was supported by the film tax incentives and not only did it win a number of awards, but it also innovated the lighting and cinematography craft.

We stand behind these program, this program and the Governor's proposed increase because when our industry thrives, California thrives. And if I could take a moment of personal privilege, I'd like to also thank Representative Zabur. When our industry was struggling, our Members were struggling.

IATSE and the Teamsters came together to throw an event called Lean in which provided toys for the during the holidays for the Members that were unable to afford a holiday. And it also had gift cards for food and groceries and stuff so that they could have dignity in supporting their families.

And it was only supposed to be for one year and because of the struggles of last year, it's turned into an annual event. So I'd like to personally thank representatives of board for coming out and supporting us and all the representatives that have supported us throughout the years. Thank you.

Thank you.

Hello, my name is Ashley Hippolyt and I'm the Executive Director of Hollywood Cinema Production Resources Also known as Hollywood cpr, a union training program that seeks to create a pathway into the entertainment industry.

For over 27 years, Hollywood CPR has been dedicated to preparing local LA residents, particularly those from underrepresented communities, for careers in the entertainment, crafts and trades. As many of you know, the entertainment industry is powered by behind the scenes professionals. Lighting technicians, set dressers, camera operators, costumers and more, all skills we provide training for.

At Hollywood cpr we equip students with hands on training and industry knowledge from successful working practitioners who also provide invaluable real world insight on how our students can extend their networks, their soft skills and what they need to succeed in the industry.

But we don't just provide training, we create career pathways that lead to sustainable, well paying jobs. Many of our alumni go on to earn between 80,000 to 150,000 annually through production jobs in Los Angeles, which allows them to contribute to the economic development of Los Angeles while also supporting themselves and their families.

Thanks to the tax credit program, we've been able to scale our work and support more students which has been instrumental. We work with organizations serving justice, impacted individuals, veteran serving organizations and foster youth to provide meaningful career pathways for individuals who often face barriers to entry.

To ensure even more communities have access to these life changing careers, we have expanded our campus to to multiple community colleges. For the past 22 years, our approach has been incredibly successful. Our graduates have become leaders in entertainment, pioneered new areas of the industry, purchased homes, and even returned to mentor the next generation.

The Last few years, however, have been incredibly difficult. With production leaving La, jobs are scarce and the future feels uncertain and frightening for many of our recent graduates, many that you'll hear from during public comment. Without consistent production work in La, we will be giving false hope to those who dream of a career in entertainment.

I have heard that some see production incentives as a corporate giveaway, but the reality is this, when production leaves, jobs leave. I've devoted my career to giving back to young people and giving them a chance to build a career that provides economic security and a real answer to poverty and hopelessness.

These jobs are that lifeline to generational change and without them, all the training in the world is meaningless. This industry isn't like other trades. It's an ecosystem with multiple employers, agencies and pathways for those with the specialized skills who have put in the time to train and refine their craft.

They shouldn't have to leave LA to build a future. If we don't act now, we won't just lose an existing skill, skilled and experienced workforce. We will lose the opportunity to offer that same dream to the next generation. Thank you.

Thank you, Assemblymember Bryan.

I just want to thank you all for coming up and for your presentation. Just a quick comment and then I actually have to leave. A lot of people think that the entertainment industry is full of people like Mr. George and that that's who we all wanted to be. I certainly wanted to be Mr.

George when I was younger.

Nobody wants to be Mr. George, not even my kids.

Mr. George the actor or Mr. Actor. But actually a lot of people just want to work a livable wage job, have some dignity, be able to support their family and do something that's meaningful. Produce beautiful works of art that can be shared with others and with the rest of the world.

That's the way this tax credit is structured for those everyday people who put in that sweat equity every single day here in California, who deserve to stay in California, who deserve to work in California, who deserve to keep a roof over their head in California.

There sounds like there's some changes to the program that we should and will make, but one of those changes should also be funding it so that it's Competitive. This is going to be a complicated process and of course I will be supportive. But I also wanted to just give a lot of credit to our chair.

There is nobody in the state Legislature, not Mr. Zabur, not myself, not Ms. Mckinnon, not Mr. Lee, who is more capable and better positioned to navigate the complex priorities between housing our brothers and sisters on the street, increasing our housing production and balancing the need to keep this industry thriving.

So thank you, Madam Chair, for this informational hearing. You are welcome.

Thank you.

Yes. You guys, thank you so much for your presentation this afternoon. As I said, I'm a child of Hollywood and so I really do know how important it is to keep these jobs in California, in Southern California. My parents, they weren't actors. They worked behind the scenes and so they made a great living.

They bought a house, they're from Texas. They moved to California with the dream of working for the motion picture and television industry. And they got those jobs and you know, they raised us, paid for me and my brother to go to school and you know, we had the American dream from having those types of jobs.

And I also got to dance on Soul Train, so I always have to throw that out. And so we need to keep this industry here, we need to keep it thriving. I'm going to take you up on that because I've watched 21 seasons of Grey's Anatomy, so I want to come and visit the set.

And so I would love to come and see that because we did have, we did not have. When I say we, Senator Lola Smallwood-Cuevas and I, we did not have a good experience when we went on studio tours because we didn't see that diversity. And so, you know, let's try it again. Let's try again.

And let's, let's make sure we get out and see that. And I'm committed to fighting to make sure that this industry stays in California.

And the shoes are fire. I peeped the shoes as you were leaving the fire.

She is one of the most well dressed Members of the Legislature. So it's well reserved. I would just say, you know, having been someone who aspired and maybe one day I'll retire and I'll do what you guys do instead of this boring job over here is because I really do believe in this industry.

It's the one that captured my imagination as a kid, especially when there were very, very, very, very, very few APIs and in at all media level. Right. And that's why diversity is so important to so many, many Members of Legislature. And we Want to hone it in.

But I also want to be cognizant that, you know, this industry, we value it because of all the union jobs and all the good paying jobs out there for Californians.

But we also realized last year you had one of the most momentous strikes in history is because the studios, the same studios who are the overwhelming beneficiaries of this tax credit are the conduits for this. Right.

And so I have a hard time sometimes trusting it because we know that in some ways this is trickle down, where the tax credit that we give then goes, passes down hopefully to the workers.

I want to make sure that the money we invest with public taxpayer dollars that people in my district, the Bay Area, pay into goes to you. Not to some studio execs, not to all these things.

Because at the end of the day, the people who claim and file, and I look at the different companies like Amazon, Disney and stuff that zero their tax liability is a really big consideration for us because when we change the last film tax credit, we put in refundability because not enough studios, not enough entities could participate because they already were able to zero their tax liability.

I repeat that they were already able to zero their tax liability. So we opened this tax credit up for these corporations so that they can start zeroing out their sales tax, their corporate taxes, all these other things. And in effect, yes, it benefits you, right?

But the end of the day, if this is the investment that Californians want in our workforce, I want to make sure almost every single dollar goes to someone that's below the line or, you know, above the line, if it's possible. Right. But goes to workers.

And that's really what we, I want you to understand as I'm channeling is that at the end of the day, who not present right here, MPA is not here talking to us right now, the studios aren't here talking to us. But they are the ones who are going to incur a lot more Christmas for me.

But I want to be able to support you and make sure that industry grosser wages grows your compensation. Because I understood the same issues that you're striking about and talking about were really big issues plaguing the entire entertainment industry. And sorry, some of the AI stuff came from my area to haunt you guys.

But like, you know, these are the real issues that I want to make sure that you all are taken care of. And so the criticism of this, this program comes from making sure that all the taxes we pay don't overwhelmingly beneficial corporation rather than the workers. So I really appreciate everyone being here.

I do appreciate the chair for such a great panel and getting us superstars as, as you can see. But really do appreciate all the work you do. And I really do honestly mean it is. I have open door policy, so I do want people to come show me the math. Show me your experiences.

I'm a Bay Area kid, so I don't have the same studies in my backyard. I don't get to see it the same way. So always open to more conversations. Thank you.

Thank you, Assembly Member and Assemblymember Zer.

Thank you.

So first, I want to thank you all for being here. I, I've seen you out, all three on the front lines really doing this because I think, as Assemblymember Lee has said, this is about jobs and about good quality jobs for workers here in California.

And you know, I think the reality is that we've got a, we're in an environment that isn't perfect.

I know that many of the questions that, you know, I've gone back and forth about the Georgia program versus the California program, they, they reflect the fact that the program here in California is focused on generating jobs and the one in Georgia isn't.