Senate Standing Committee on Appropriations

The Senate Committee on Appropriations will now come to order. We're meeting today in Room 2200 of the O Street building, and it will be another relatively short hearing, so we need all the Committee—Committee Members—come down so we can start with the quorum, which I believe we have. We only have 15 measures remaining on today's agenda.

One measure that is still listed in the daily file but will not be heard is AB 377 by Assemblymember Tangipa. That Bill will be sent directly to the Senate Floor, Pursuant to Senate Rule 28.8.

We will be taking a vote on one urgency measure, AB 1138 by Assemblymember Zbur and Senator Allen, pertaining to motion picture tax credit. The remaining bills will be moved to the suspense file.

The authors for all of the suspense measures on today's agenda have waived presentation, so they won't be here to testify. As usual, however, we will be taking testimony from the public on each and every item, so feel free to come forward when we call the item.

The Department of Finance has let us know that they don't have files on any of the bills up for hearing today, so their representative will not be testifying. Before we begin, I want to remind any witnesses to limit their testimony to the fiscal aspects of the Bill.

Please refrain from lengthy policy discussions and repeating prior testimony in your comments. So, before we begin hearing testimony on the measures before us today, let's establish a quorum. Madam assistance, please call—Assistant—please call the roll.

[Roll Call]

We have a quorum. So, now we can move on to the business of the day. First, Assemblymember Zbur, let me ask you if you'd like to take up your item first or whether you'd like to wait for Senator Allen. My understanding is he wanted to be here. That sounds fine. That sounds fine.

We'll just take you up when—whenever Senator Allen gets here. So let's start off then at the top of the agenda. Ah, perfect timing. Never mind top of the agenda. We're going to take up item 12, AB 1138, by Assemblymember Zbur and Senator Allen, which is income and corporate taxes, tax credits, motion pictures.

While this Bill clearly meets a criteria for suspense, it is an urgency Bill that's related to the 2025-26 budget. So, we will be entertaining a do pass motion. Gentlemen, please tell us about your Bill.

Madam Chair, Members, thank you so much for allowing me to present AB 1138 alongside Senator Allen, who is the joint author of the Bill.

I'd also like to thank the principal co-authors, who were previously joint authors, on the two companion bills that made their way through both houses of the Legislature, Assemblymembers Bryan, Gipson, and Quirk-Silva and Senators Menjivar, Perez, and Stern, all for their hard work and advocacy on the Bill.

California's iconic film and television production industry is in crisis. The hard working individuals and small businesses that have built this industry, which is central to California's identity, are currently facing unemployment and business losses at levels reminiscent of the Great Depression.

The LA County Economic Development Corporation found that for every tax credit dollar spent resulted in an economic output of $24, $16 in Gross Domestic Product, and $8.60 in wages, and $1.07 in state and local tax revenue. This investment has successfully generated tax revenue, wages, and economic growth for California, state, and local governments.

That's why Georgia, New York and now Nevada and other states are doubling down on their film tax credit programs because it helps their workers, and it helps their state tax coffers as well. The goal of AB 1138 is to modernize the California Film and Television Program—Tax Credit Program.

Among many other program changes, this Bill increases the base tax credit rate to be more competitive with the other jurisdictions within the Los Angeles area, as well as outside the Los Angeles area. It expands eligibility for the broader range of types of production and adjusts qualified expenditures to account for full production costs, more accurately.

Every change to the program that's embodied in this Bill was guided by the goal of retaining and bringing back high-quality jobs and supporting our small businesses that support the industry. AB 1138 presents a multifaceted approach to revitalize California's entertainment industry.

I want to express my gratitude to Governor Newsom and for the Members of the Legislature for their commitment. This Bill passed—we had identical bills that passed both houses with bipartisan support in each house, so this Bill is moving forward, but it's already passed the Senate and in the earlier—the prior version.

And so, I want to thank both the Governor and the Members of the Legislature for supporting this Bill so strongly. Due to the passage of SB 132, which was signed by the Governor last week, it reflects the increase of the tax credit from 33 million to 750 million.

So, the cost of the expansion for this program is already reflected in the budget and any additional administrative cost will be minimal. By prioritizing the retention and creation of jobs within California, AB 1138 endeavors to ensure that the Golden State remains a thriving hub for creativity and production, ultimately contributing to a vibrant and sustainable economy.

With that, I'd like to now turn over the mic to Senator Allen.

Well, thank you Assemblymember, and thank you for your partnership on this effort as we've been working to get this through this year. We know that we've really been seeing massive loss in this area of our economy. So many disheartening stories about the tens of thousands of workers who've been unable to find jobs due to low production.

And this is because we have other jurisdictions that are throwing all these incentives at production. And our program, while in place, has simply not been able to even come close to meeting the need.

And just to give you an idea, something like three quarters of the projects that were unable to secure a tax credit through our program end up moving production out of state. That's billions of dollars that we end up losing. So we have, we know this is a tried-and-true program.

We've got lots of data on how the program has worked in our economy over the past few years. We know that it's a net revenue generator for the state. We also know that it's a really important job creator for people here.

This was the product of a very difficult and intense negotiation with many different stakeholders through the course of the year. And this is ultimately about ensuring that we create the economic—we recreate the economic—activity generated by this industry and all the jobs that come along with it.

We know that this will also help us with tax revenue. So, with us to testify in support of the Bill, we have Melissa Patak, who's here from the Motion Picture Association. If it would so please the chair.

That would be great.

Thank you, Senator Caballero, Members of the Committee. Melissa Patak with the Motion Picture Association. Thank you all. As Assemblymember Zbur has noted, you all have voted for SB 630 when it was up in the Senate and this Bill really embodies what was in SB 630. So, thank you for your support.

The important thing for this Committee is that this Bill doesn't add to the cost.

The money has been approved in a budget trailer bill and interestingly, for the purposes of your consideration, the analysis points out that it takes a long time between when the credits are allocated and when they are applied for and actually utilized—and on average, about four years.

And the analysis points out that this Bill will—may—cost the state about $200 million in out years 2028 and 2029. So, this really is a jobs program, that's really what it is about.

And we have suffered tremendous losses in jobs, and this will reset that and be able—enable—California to attract production good quality productions that create thousands and thousands of good middle class jobs. So, we thank you for your support and look forward to this Committee's consideration of the Bill and I'm happy to answer any questions.

Thank you very much for being here today. Thank you. Other people—testimony—in support?

Good morning, Madam Chair. Chris McKayley on behalf of my clients, the Hollywood Chamber of Commerce and the Los Angeles Area Chamber of Commerce, in strong support. Thank you.

Thank you.

Good morning, Madam Chair and Members. Missy Johnson with Nielsen Merksamer, here on behalf of the Directors Guild of America, in support. Thank you.

Thank you.

Good morning, Madam Chair and Members. Thank you to the authors. Greg Hayes here with Brownstein, on behalf of Warner Brothers Discovery, in support.

Thank you.

Good morning, Madam Chair and Members. James Thuerwachter with the California State Council of Laborers. We're in proud support as well. Thank you.

Thank you.

Morning, Chair and Senators. Freddie Quintana on behalf of Los Angeles Mayor Karen Bass and the City of Los Angeles, in support.

Thank you.

Chair, Russell Manning, on behalf of California State Treasurer Fiona Ma, in support.

Thank you.

Thank you, Madam Chair and Members. Megan Subers on behalf of the Writers Guild of America West, in support.

Thank you very much.

Good morning, Madam Chair and Members. Greg Campbell on behalf of Paramount Global, in support.

Madam Chair and Members, Kelly Jensen on behalf of Netflix, in strong support.

Thank you.

Good morning. Mike Robeson, here on behalf of the Walt Disney Company, in support.

Thank you.

Good morning. Shane Gusman on behalf of the Teamsters and SAG-AFTRA, in support.

Thank you.

Chloe King with Political Solutions on behalf of the Association of Talent Agents and the California Travel Association, in support. Thank you so much.

Thank you.

Hi, good morning. Tiffany Fan, on behalf of Sony Pictures Entertainment, in support. Thank you.

Thank you very much. Anyone else in support? How about opposition? Is there anybody here that would like to testify in opposition? Seeing no testimony, bring back to the Committee for questions or comments? Yes, sir.

Thank you very much. You know, ironically, this last weekend, I was at an event. It wasn't really an event, it was a memorial, with a lot of people that are in this industry. They have been—I've had family members that were grips and, you know, sound guys for years and years.

And what's happening in the motion picture industry and the television industry is really sad. And part of it is, you know, the people that were here before were the dads. Well, they're all my age and older now. And this is kind of a legacy business where kids follow in their father's footsteps.

You know, my cousin followed in his dad's footsteps and now, they're being priced out of California. You know, I was hesitant to support only because in the earlier, earlier version of this Bill, or the Senate version of it.

Because I'm afraid people are going to think this is going to fix the problem with what's happening with the movie industry. What's happening with the motion picture industry and production in California is everything's too doggone expensive, either on the business side or the middle-class job side, because those are middle-class jobs. Make no mistake.

I was not in Beverly Hills. I was in Santa Clarita in Saugus. And everybody has a very middle-class home. The people that retired have moved out and their kids have moved on. The young man that I was at a service for would have been in that industry but couldn't.

And so, he was in Texas when he passed away. I don't know that this is going to fix it. And I hope there's a mechanism in place to monitor this and so that we can actually discover what it is that's causing our movie industry to have to leave California.

Because, you know, from the energy costs to run a production studio, that has risen astronomically. And then, you look at our legal environment in California, everybody sues for everything. There's another one. Labor costs, the housing costs for—you got to get paid 200 grand a year just to afford a really tiny house out in the suburbs of LA.

That's not going to fix the movie industry if we're just doing a tax credit and that gets spread out a little bit.

We need people to be able to work in the industry and we're losing those people. And it was really apparent to me, at this event the other day, talking to some of the folks who used to be in the industry and have found other things to do now or left the state.

And so, you know, I'm going to be supporting this because it's doing—it's kind of a band aid between now and when we figure it out. Hopefully, what has been happening in California in the last couple of years is that we're figuring it out and we're going to start changing all the other stuff too.

Because not having tax credits and having other states give more tax credits, we have the state where this stuff is most beneficial. It's most beneficial to be here with the environment that we have where they can film longer and your boat doesn't get struck by lightning like happened in Georgia.

Yeah, there's a boat that got struck by lightning. You know, I'm thinking we have a great environment to do stuff here and that should be the biggest advantage we have and it's not anymore. And that's sad.

So, with that being said, yeah, I will probably support this today, and—but I hope we keep an eye on the ball and really figure out what's causing the exodus.

Any more questions or comments? Seeing none, you may conclude, Assemblymember, Senator.

Well, appreciate your comments. You know, I don't think either of us would ever claim that this is a magic bullet. We know there are massive challenges for the industry. We know this isn't going to solve all of them, but we also know we need to take a proactive step to help shore up aspects of the production exodus.

So, I, I agree with you, Senator. This isn't going to fix the problem, but it's certainly going to make the situation much better. We know that all the experts who work in this field know that this was necessary. It's going to increase the size of the credit.

It's going to make it more flexible, more usable.

There are going to be robust reporting requirements from the Film Commission that will address kind of the big picture questions that you're talking about so that we'll get more information and better understand how to, how to help this industry stay robust and vibrant in our state for many, many years to come.

So, I appreciate you recognizing though, that it's a really important step in a, in the direction of helping to shore up this vital industry for our state. We've carefully crafted it, and I just appreciate everyone's work on this Bill over the course of the year, and I respectfully ask for an aye vote and I want to give Senator Zber.

So, I just want to thank all the Members of the Committee. Senator, I don't disagree with a lot of what you've said. I think one of the, this isn't a magic bullet, but it's, I sort of think of it as sort of a jumpstart.

I mean, we've seen significant reductions in production in California in the last 2 and 3 years.

And while there are some other competitive issues that are out there that I think you've rightly identified, one of the things that we do know is that the lack of competitiveness of the tax program is a key—is one of the key factors.

And we know that the folks that are making decisions are telling us that they don't even consider California now because the tax credit program, until this modernization was so noncompetitive.

I mean, you think about it, you know, Georgia and Canada have tax credit programs that essentially have, you know, sort of a 30—30%—rate, 30 to 40% rate against all the expenditures. Our effective rate in California, given the way our program is structured, is about half of that.

So, if you actually have not only other issues in terms of costs like New York also does, but you also then have a tax credit program where you're actually not even close to sort of competing with the other states, we know that that's a why at least some of the productions are leaving.

So, I just want to thank everyone for the consideration today and respectfully ask for your aye vote.

Well, thank you to both of you for your work on this. I know that putting in the details about how we're going to get reports back and doing it in conjunction with the industry has been really important. So, I do appreciate that. Do we have a motion on AB 1138? Yeah, motion's been made.

The motion is do pass to the Senate Floor. Please call the roll.

[Roll Call]

Bill is out 6 to 0. Thank you very much. We're going to move on now to the rest of the agenda. We'll start with AB55 by Assembly Member Bonta, who has waived presentation. Is there anyone here that would like to testify in support of AB55? How about in opposition, seeing no questions or comments from the Committee?

This is a suspense file candidate. So without objection, AB 55 will move to suspense. AB 1296 by Assembly Member Banta who has waived presentation. Is there anyone here that would like to testify in support? How about in opposition, seeing no questions or comments from the Committee? This is a suspense file candidate.

So without objection, any AB 1296 will move to suspense. AB 251 by Assembly Member Kalra. Assembly Member Kalra has waived presentation. Is there anyone here that would like to testify in support? Welcome.

Good morning. My name is Roxy Ortiz and I'm with the Association of Regional Center Agencies, ARCA in support.

Thank you.

Thank you very much. Anyone else in support? How about in opposition, seeing no questions or comments from. Ah, sorry about that.

Danielle Parsons with the California Assisted Living Association in opposition.

Very good. Thank you so much for being here. Appreciate it. Seeing no questions or comments from the Committee. This is a suspense file candidate. So without objection, AB 251 will move to suspense. AB 266 by Assembly Member Davies. Is there anyone here who would like to testify in support? How about in opposition? Seeing no comments or questions from the Committee.

This is a suspense file candidate. So without objection, AB2 66 will move to suspense AB 377 by Tangipa has been pulled for or this. This is the one that was moved 28.8 to the floor. So we will not take it up today. AB 378 by Assembly Member Valencia who has waived presentation.

Is there anyone here that would like to testify in support? Anyone here like to testify in opposition seeing no questions or comments from this the Committee? This is a suspense file candidate. So without objection, AB 378 will move to suspense AB 393 by Assembly Member Connolly. Anyone here like to testify in support?

Madam Chair Members Kobe Pizotti on behalf of the California Association of Psychiatric Technicians in support. Thank you.

Thank you so much. Anyone else in support? How about in opposition seeing no questions or comments from the Committee? This is a suspense file candidate. So without objection, AB 393 will move to suspense AB 413 by Assembly Member Fong.

Is there anyone here who would like to testify in support? In opposition? Seeing no questions or comments from the Committee. This is a suspense file candidate. So without objection, AB 413 will move to suspense AB 562 by Assembly Member Solache. Assembly Member Solache has waived presentation. Is there anyone here who would like to testify in support?

How about in opposition? Seeing no questions or comments from the Committee. This is a suspense file candidate. So without objection, AB 562 will move to suspension suspense AB 1390 by Assembly Member Salache who has waved presentation testimony and support testimony and opposition Seeing no questions or comments from the Committee. This is a suspense file candidate.

So without objection, AB 1390 will move to suspense. AB 896 by Assembly Member Elhawary. Assembly Member Elhawary has waived presentation testimony and support testimony in opposition, seeing no questions or comments from the Committee. This is a suspense file candidate.

So without objection, AB 896 will move to suspense AB 1178 by Assembly Member Pacheco who has waived presentation. Testimony in support? Testimony in opposition? Seeing no questions or comments from the Committee. This is a suspense file candidate. So without objection above 1178 will move to suspense AB 1181 by Assembly Member Haney who has waived presentation testimony in support.

Durazo Manning on behalf of California State Treasurer Fiona Ma in support.

Thank you very much. Anyone else in support? Testimony in opposition? Seeing no questions or comments from the Committee. This is a suspense file candidate. So without objection AB 1181 will move to suspense AB 1120 by Assembly Member Arambula. I'm sorry. AB 1220 by Assembly Member Arambula who has waived presentation testimony in support.

Good morning. Roxy Ortiz with the Association of Regional Center Agencies in support of 1220. Thank you.

Thank you very much.

Anyone else in support? Testimony in opposition? Seeing no questions or comments from the Committee. This is a suspense file candidate so without objection AB 1220 will move to suspense and finally AB 1293 by Assembly Member Wallis who has waived presentation Is there anyone here who would like to testify in support how about in opposition seeing no questions or comments from the Committee this is a suspense file candidate so without objection AB 1293 will move to suspense and I know you're sad to hear this, but that has concluded that is a conclusion of our hearing today.

I'd like to thank everyone for participating in today's hearing. We've concluded the agenda meeting of the Senate Committee on Appropriations is adjourned.

I know.