Over the past 12 years, Connecticut has doled out nearly $1 billion in film and television tax credits, ranking its incentive program among the most generous in the country.
But for Connecticut and a handful of other states that have invested significant sums to lure productions and spur movie and TV industry jobs, the incentives have largely been a bust, a West Coast academic argues in a new analysis.
Michael Thom, an associate professor at the University of Southern California, used a “quasi-experimental” model to assess film incentives in the highest-spending states since the programs proliferated in the mid-2000s. Besides Connecticut, they include New York (the largest, at $4.65 billion), Louisiana, Georgia and Massachusetts.
Thom concluded that film incentives in those five states have produced “mostly no statistically significant effects” on motion-picture employment growth.
“These findings are robust to several alternative models and should lead policymakers to question the wisdom of targeted incentives conferred on creative industries,” Thom wrote in the paper, first published in late September in the State and Local Government Review.
Thom found that spending more on incentives (which typically come in the form of tax credits on qualified production expenditures) mostly did not correlate with increases in employment, nor did spending less correlate with decreases in employment.
He also concluded that, in most cases, film incentives did not have statistically significant employment impacts, and where he did observe impacts — including some here in Connecticut — they were “uninspiring.”
Reached by phone Tuesday, George Norfleet, director of the Connecticut Office of Film Television & Digital Media, said Thom’s findings don’t reflect his view of Connecticut’s film incentives.
“We have spurred relocations of companies bringing significant production operations and jobs,” Norfleet said. ”I would say that these are the kinds of jobs that are important to us and we believe we are building a novel industry here in Connecticut that is attractive to young people and is helping to diversify our economy.”
Since 2007, industry productions have claimed nearly $3.6 billion in qualified expenditures under Connecticut’s incentive programs, which as of 2018 had issued approximately $987 million in corresponding tax credits, according to Department of Economic and Community Development data provided to HBJ.
The highest total was in 2017, when $133.3 million worth of credits were issued.
The Motion Picture Association, a national trade group, has assailed Thom’s latest research over its funding source: The Koch Foundation.
“The study was funded by the Koch Foundation, whose billionaire brothers — Charles and David Koch — virtually destroyed Florida’s film industry four years ago when they backed legislation that ended the state’s long-running tax-credit program,” MPA told Deadline.com this month.
The MPA also alleged “poor data selection and problems with methodology.”
In an email to HBJ this week, Thom responded to the MPA’s criticisms:
“It’s understandable that lobbyists for the industry benefiting significantly from tax incentives would not be pleased with my findings,” Thom said. “However, my findings align with a number of previous academic and state government studies that have reached similar conclusions. It’s worth noting that all of my research (both this study and two previous studies) is peer-reviewed; the industry’s reports are not, nor have they ever been. As with any independent academic research, a study’s funding has no bearing on its design, implementation or conclusions, which was the case with this study.”
In his new report, Thom used an “interrupted time series analysis” model, which is an alternative to a “panel study,” a common methodology used in other film incentive studies.
A panel study doesn’t answer the question of whether incentive programs are all poor performers, or alternatively, if they work in some states but see their gains canceled out by weaker-performing states, Thom said.
He isn’t the first to question the effectiveness of state film incentives.
Connecticut narrowed its own program in 2013, due in part to budget realities as well as reservations over accurately measuring the program’s impact.
Since then, the state has mostly excluded traditional “motion pictures” from the incentives program and has shifted its focus to digital productions and other projects.
DECD assesses the film incentives in its annual reports. In the most recent report, for 2018, the agency concluded that between 2009 and 2017, its three film incentive programs had resulted in average annual new employment of 3,605 since their creation. However, the programs have also resulted in negative net revenue to the tune of approximately $676 million, DECD said.
DECD was not deterred, contending that there are various benefits to the state not reflected in its numbers.
The agency recommended continuing the three programs, but potentially changing the size of the tax credits “should negative results persist.”
