Morrell
acted all upset when the conference committee forwarded state Rep. Joel Robideaux’s
instrument approved ultimately by the Legislature, which then progressed on to
Gov. Bobby
Jindal’s disposition. Echoing the industry’s representatives, he decried
the outcome, claiming
he was left out of final negotiations over the bill – even though he sat on
the conference committee dealing with it. That’s probably because from the
start of the year in discussions of reforming the wildly generous credit he
acted as the industry’s most reliable shill among legislators, and those individuals
more interested in beginning to address the program’s chronic wastefulness – at
best it returns
less than a quarter to taxpayers for every dollar they surrender to filmmakers
– knew he would contribute nothing to addressing the fiscal hemorrhage it has
become.
Except that they didn’t quite
accomplish it. The bill establishes a $180 million annual cap – although considering
that implies a waste of over $135 million a year this actually makes progress as
the last few years have averaged in credits paid out of over $250 million
annually – on credits redeemed, not certified. The industry fears that, with
several hundred million of these outstanding, redemptions could crowd out a
significant portion of new expenditures that qualify for credits (Morrell did
have several bills pass that marginally tightened program qualifications that
should save a little on the amount of credits issued).
Redemption rather than
certification as the limitation metric makes sense because otherwise this could
cause potential producers to rush to make films at the beginning of every
fiscal year, may exclude bigger productions whose backers felt they could not
be certain about getting all their claims in before the mark was hit, and makes
for a true expense cap – redemption could occur years after certification, and
many presented at once could throw a particular year’s budget way out of whack.
Further, the redemption cap allows any single production only $30 million of
these credits.
However, the problem is that for
the awarding by redemption instead of at certification, both necessary to have
a cap that brings predictability to budgeteers and for it to apply fairly for
past recipients as their credits become much less valuable by an inability to
redeem them because of a cap that could stretch into perpetuity, the bill had
to acquire a sunset date, at the end of fiscal year 2018 that also applies to
the single-production limit. This prevents holders of these credits and those
who would acquire them from making a legal case that the state reneged on a
deal, despite noises coming from them about how a limit built on redemption
rather than certification would trigger legal action.
More realistically, potential receiving
entities and their hangers-on have embarked upon a political strategy of asking
Jindal to veto the bill, employing that contention that filmmaking in the state
will dissipate through enactment of the legislation as justification. In doing
so, they make a remarkable admission: without the credit – that is, without the
state paying at least a portion of their state tax liabilities if not all of
them and also extra money by their ability to sell the credits to others that
leads at least indirectly to state subsidization – they won’t do business in
Louisiana. Rather than lamenting that, the citizenry should cheer, for, unless
one directly benefits from this subsidy, who would want to keep around an
activity that provides a less than 300 percent negative return on investment?
Plain and simple, the industry
admits only the legal bribery involved keeps the swarm around, and if it no
longer can feed as greedily in Louisiana as compared to somewhere, it’ll decamp
to somewhere else to get larger handouts. Which should be the point of the
program – make it so that it attracts the most efficient producers with state
resources to reach the goal of the credits paying for themselves, not those in
it for the free dough at taxpayer expense.
But the necessary evil of the
sunset clause threatens to wreck this entire objective. Particularly large
studios or patient investors can wait out the next three years, and if the law
remains unchanged, pounce after Jul. 1, 2018 on the again-unlimited pot of
taxpayer bucks, with any sized production. That environment only peripherally
will limit efforts and dollars paid out over the long run and put the state
back where it started, hosting the gorging locusts.
So for this to work at all, the
Legislature must come back within three years and change the cap to include certifications
and in size. This can work if in the interim the state figures out exactly how
much in certifications have gone out the door, add to it a reasonably cool-down
figure, and then terminate the program after so many years. For example, let’s
say as FY 2018 came to close there was known to be $500 million in unredeemed
credits. The law could be reenacted to say in FY 2019 $150 million would be
certified or redeemed, the next year $140 million, then successively $130
million, $120 million, $110 million, and finally $100 million, after which from
FY 2024 on there would be no redemptions and that the maximum amount of
redemption for any given previous year would be $100 million. This effectively
stops the subsidization after FY 2022 but gives the industry plenty of time not
only to adjust to having to make it on its own but also gives credit holders an
opportunity with some flexibility to cash in.
Absent this kind of change, HB 829
really only shifts refunds that would go out to some in the next three years to
occur four years or more in the future, a temporary solution to a chronic
problem. Unless a stake, even incrementally, is driven through the heart of the
program, it will continue to stalk millions of taxpayers to the advantage of few
in number, maybe in the thousands and some not even state residents. Which is
why any complaints heard about the bill and calls for a veto of it illustrate
only the exceptional level of greed of program beneficiaries who by that action
show themselves so uncompromising that they won’t countenance even temporary restraint
of their gravy train.
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