Hohman Testimony to House Committee

Film subsidy program has been oversold

(The following is a transcript of the testimony given by James Hohman, assistant director of fiscal policy, on Feb. 25, in front of the Michigan House Tax Policy Committee.)

Giving handouts to Hollywood was originally pitched as an economic development program. Some supporters even asserted that subsidies could lead to an industry that could rival auto manufacturing.

Seven years later, the program has succeeded in drawing some film productions. But after devoting roughly $500 million, Michigan has little to show for these taxpayer resources other than acknowledgment in the credits.

Stay Engaged

Receive our weekly emails!

The reason is simple. The program was fundamentally flawed and oversold from the start.

A program that’s supposed to be about economic development must be judged with the metrics used to measure an economy. Michigan’s economy produces goods and services worth $433 billion. According to the Film Office, incentivized film productions spent $143 million here in 2013, for which they were awarded $39 million in taxpayer money. Their spending in the state is just one-third of one-tenth of one percent of the state production.

In the peak year of the program, producers spent about $293 million here, at a cost to taxpayers of $115 million. That’s two-thirds of one-tenth of one percent.

Even without accounting for the costs to taxpayers that make this a drain on the economy and the budget, this program cannot be about finding the next industry for Michigan.

Supporter’s promises were not limited to economics. There were promises the program would suspend the state brain drain. Yet Michigan continues to lose college graduates — and non-graduates too. Forty-eight thousand adult college graduates departed Michigan for other states from 2010 to 2012, the second-worst record in the country. Another 44,000 people without degrees also left, the nation’s fifth-worst record.

There were hints that, as long as the state kept these incentives going, that someday there would be a film industry that did not need subsidies to thrive.

But seven years after the handouts began we are no closer to having a permanent film industry. According to the Bureau of Labor Statistics, after all the subsidy payments there has been virtually no change in the number of Michigan film-production jobs. According to the Bureau of Labor Statistics, there were 1,500 film jobs in 2007 and there were 1,600 in 2013. That’s the most recent figure from the BLS, because this industry is too small to measure in its other programs.

That doesn’t mean some people haven’t gotten temporary jobs working on subsidized productions. But the program’s expectations have not been met.

So legislators and the public have been oversold.

But there was only a destructive favor to sell. Giving handouts to Hollywood benefits a select group at the expense of many. Those concentrated benefits are not worth the cost.

And even if it were spent elsewhere in the budget [rather than returned to taxpayers,] it would likely have larger impacts — policymakers have discussed how to fix the roads for as long as they’ve provided film incentives.

Out of basic fairness to taxpayers, and to all those in this state who rely on core state services, the Legislature should shut down this program.

It does not produce a public good, it does not protect residents, it does not alleviate some social injustice. It drains resources that could do a lot of good if properly employed. It is right that the Legislature is considering ending it.