Texas film incentives program facing state budget ax

Plenty of movie blockbusters have been built around the theme of plucky protagonists triumphing over adversity through grit, hard work and the righteousness of their cause.

Boosters for the film and video game industries in Texas are hoping to write themselves just such a Hollywood ending at the Capitol, where a taxpayer-funded incentive program — which backers say is critical to luring movie, TV and video game productions to the state — hangs in the balance.

They’re trying to carve out $50 million to $75 million for the program in the state’s upcoming 2018-19 budget, even though House and Senate budget writers initially earmarked only $10 million for it over the two-year cycle and recent legislative action has cut the Senate’s proposed appropriation even more. In addition, some Republicans are angling to eliminate the incentives entirely — and abolish the Texas Film Commission, which oversees it.

That leaves advocates — who say previous cuts in incentive payments have already cost the state millions of dollars in industry spending — with the task of convincing lawmakers the program is important enough to warrant more resources before the budget is finalized in May, at a time when the state is wrestling with a multibillion-dollar budget gap.

They also must surmount philosophical objections from conservatives opposed to taxpayer-funded incentives of all stripes as inappropriate meddling in the private sector, and who, in some cases, take a dim view of the cultural impact of the film and video game sectors.

“Unfortunately, our program is one that, from the outside looking in, looks like welfare for Hollywood,” said Mindy Raymond, executive director of the Texas Motion Picture Alliance, an industry lobbying group. “But it’s really a big misconception. It doesn’t ring true to how it works.”

The program — known as the Texas Moving Image Industry Incentive Program — allows qualifying projects to receive rebates on money they spend in Texas. Applicants must submit receipts to the Texas Film Commission to prove their so-called Texas spend.

The intention is to ensure the incentives create jobs for Texas crew members, set designers, video game programmers and others rather than going to line the pockets of Hollywood or corporate bigwigs. The amount of the rebates is based on a sliding scale, but movies, standard TV shows and video game projects can recoup a maximum of 20 percent if they spend $3.5 million or more in the state.

According to the Texas Motion Picture Alliance, the incentives have returned $5.55 for every dollar spent on them and created nearly 143,000 Texas jobs over the past decade. Some critics have countered that many of those jobs are temporary because they end when productions wrap, but supporters say that’s not the case when the industry is robust enough to support a steady flow of projects.

Regardless, the job numbers lately appear to be going in the wrong direction. The Legislature already cut funding for the incentives to $32 million for the current biennium, down from $95 million in the 2014-15 cycle, prompting some productions to leave Texas for states with more lucrative enticements. Among nearby states, New Mexico budgets $50 million each year for its production incentive program, while Louisiana budgets a whopping $180 million a year.

Industry spending in Texas dropped from $442 million in the 2014-15 period to an estimated $121 million for 2016-17, according to the Texas Motion Picture Alliance, a decline it attributes to the incentive cuts.

High-profile members of the Texas exodus include the third season of “From Dusk Till Dawn: The Series,” which recently moved from Austin to New Mexico, citing the incentives, and the show “American Crime,” which left for California for the same reason. Meanwhile, the acclaimed 2016 film “Hell or High Water” is set in West Texas but was filmed in New Mexico.

The trend is expected to continue if Texas reduces incentives even more or ends its program altogether.

“I’ll probably have to leave,” said Red Sanders, president of Red Entertainment, a small Fort Worth-based production company that debuted its low-budget comedy film “A Bad Idea Gone Wrong” at South by Southwest last weekend. “We’re a small business, and without (the incentives), I don’t think we will be here.”

Sanders declined to reveal how much his company spent on the movie but said he’s hoping to receive a rebate of about $18,000 from the film commission. He said the movie employed 38 Texans out of a crew of 42.

Panavision, a supplier of high-end cameras and other equipment to the industry, already has plans to leave the state if the incentive program is cut to $10 million or below.

John Schrimpf, a Panavision vice president who oversees its operations in Texas, New Mexico and Louisiana, said the company experienced a $1 million drop in Texas revenue in the wake of the previous cut to the incentive program, although he declined to reveal the percentage of the drop. Panavision employs eight people in its Texas office, he said, which is in Dallas.

“We have to be where our customers are,” Schrimpf said. “If (state lawmakers) take the program down to $10 million, our customers won’t be coming here, and there’s no reason for us to be here.”

But such warnings are unlikely to sway some state lawmakers, who have argued among other things that identical appeals could be made by any industry, and that it’s not the proper role of government “to pick winners and losers” by deciding which to subsidize. Some conservatives also bristle at the notion of giving a handout to Hollywood, even as industry advocates stress that’s not actually happening.

Two measures, Senate Bill 99 and SB 244, have been introduced in the state Senate to abolish the incentive program and the film office, and one, HB 779, has been introduced in the House.

“The question is, is it appropriate for the state of Texas to take tax money from a single mother who has got two jobs trying to make ends meet and give it to a producer or actor?” said state Rep. Matt Shaheen, R-Plano, who sponsored HB 779. “I don’t think so.”

State Sen. Bob Hall, R-Rockwall, is the sponsor of SB 99, while state Sen. Konni Burton, R-Fort Worth, sponsored SB 244. At a legislative hearing on SB 99, both said the incentive program is a form of corporate welfare and money spent on it would be better left in the pockets of taxpayers. They appeared to have support from some other GOP members of the Senate committee on Natural Resources and Economic Development, which held the hearing to solicit input.

But advocates for the incentives say they are undaunted.

“A lot can change between now and May” when the legislative session ends, Raymond said. “It’s not over ’til it’s over.”

Some powerful allies are on record as backing the incentives — including Gov. Greg Abbott, who has asked for $72 million for the program in his own 2018-19 budget request. Abbott’s office didn’t respond to a request for comment, but Bryan Daniel, who heads the governor’s economic development team, attended the recent legislative hearing regarding SB 99 and defended the program as presenting “a pretty robust economic picture” for the state. The film commission is part of the governor’s office.

The Texas Association of Business also supports the program.

Meanwhile, the film and video game industries have been presenting a united front in their advocacy for the incentives, a change from two years ago when some say infighting made it easy for lawmakers to target the program for cuts. About two dozen supporters of the incentives, including representatives of both industries, turned out to testify at the recent hearing over SB 99 and stress how important the program is to them.

Other lawmakers friendly to the incentives program have pushed budget riders in the Senate and House attempting to increase funding for it by an additional $62 million for the biennium beyond both chambers’ initial $10 million allocations, although the effort in the Senate recently died.

Frank Coppersmith, who chairs the Austin Game Developers Association, said the program is critical to maintaining an ecosystem of gaming-software design talent in the state. His association consists mainly of small, independent developers and companies, many of which were created by former employees of larger video game studios that might be lured out of state if Texas no longer is competitive in terms of incentives.

“Without a few of the bigger studios to both serve as training grounds and focal points, eventually your indy community will fade,” said Coppersmith, a veteran of the Texas gaming industry who now serves as chief executive of Possum Interactive, a software consulting startup focused on artificial intelligence. “If you don’t have that (ecosystem), a lot of that talent will move. And once the talent is gone, it is going to be really hard to replace.”

Raymond, of the motion picture alliance, and others say they’ll keep fighting. Funding for the incentives program might be a grain of sand on the beach compared with the state’s estimated $215 billion overall spending plan for the upcoming biennium, but they contend it’s essential if Texas hopes to retain and nurture a vibrant creative class of film, TV and video game industry workers.

“We don’t need the biggest incentive program, but we do need to be competitive” with other states, Raymond said. “We have already seen a pretty big decrease in crews, because there is just not enough work for them” in Texas.

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