Film Tax-Incentive Supporters Fail To Override Christie’s Veto
Defeat of tax-break bill will likely make it much harder to attract TV, film and animation jobs to the Garden State.
Count the Garden State Film and Digital Media Job Act as one casualty in the tug-of-war between the Democratically controlled state legislature and Gov. Chris Christie over how to best fix the state’s economy.
The bill, which was designed to attract more TV, film and animation business to the Garden State, was one of five tax-incentive measures that failed to win the necessary votes on Thursday to override a Christie veto. Most Republicans switched their previous positions and voted against the measure. Originally, the film tax-incentive bill had won overwhelming bipartisan support.
"The Senate Republican caucus has once again made it clear that they are more than willing to be told what to do out of fear of going against their governor," said Senate Majority Leader Barbara Buono (D-Middlesex) deriding the Republicans for their change of heart. Although the package of five jobs bills failed to win the override, two tax-cut bills aimed at small businesses were sent back to the governor for his signature.
No Stranger to Controversy
The Garden State Film and Digital Media Jobs Act has been controversial from the start. It was originally nixed by Christie even though an independent study, commissioned by the state Economic Development Agency at the governor's request, said the tax-incentive program generated "significant employment" in the Garden State and broke even on net tax transfers.
Supporters of the bill had been waiting for the report’s release for months and claimed the administration was holding it up because it didn’t like the findings. The report, written by the New Jersey Institute of Technology (NJIT), was finally released last week. However, along with the release were two memos by the state Treasury Department and Caren Franzini, CEO of the state Economic Development Authority (EDA) that criticized the study as flawed.
But Democrats weren’t buying it. "This is just another example of the Christie administration living in a fantasy land where facts and realities are ignored in favor of the governor’s singular agenda," said one of the bill’s prime sponsors, Louis Greenwald (D-Camden) and the Assembly budget chairman.
“This is yet another short-sighted move to close a budget hole so that the governor can boast to his conservative base about how much money he is cutting," Greenwald continued. "Meanwhile, he’s ignoring the long-term revenue and jobs this program creates, as well as the needs of our out-of-work residents.”
Greenwald’s bill would have extended a previous program that gave $10 million in tax credits for film and TV productions and expanded it to $50 million a year. Producers would also get tax credits of as much as 20 percent of their project’s costs, as long as they spent 60 percent of their budgets in New Jersey. Now that legislators failed to override Christie's veto, the entire film and TV production tax incentive will cease to exist. (The state film commission, charged with attracting and helping TV and film producers work in the Garden State, is unaffected.)
Film Under Fire
New Jersey is one of a number of budget-crunched states, including Michigan and Pennsylvania, where film tax-credit programs have come under fire.
Franzini disagreed with the NJIT conclusion that the film tax-incentive program was a "break-even" proposition. In a memo, she wrote that NJIT’s conclusion was based on the $l0.1 million in state and local taxes generated in 2009 "by the entire film industry, not just the jobs generated by the program subsidy."
If one considers the impact of jobs just created as a result of the tax-incentive subsidy, Franzini wrote, there was only $5.5 million in taxes generated, even though New Jersey was handing out $10 million in tax credits. That means, according to Franzini, that the tax-incentive program actually cost the state $4.5 million.
Carl Van Horn, former EDA chairman, agreed the film tax-incentive program didn't work.
"My experience is based on the reality of what actually happens," said Van Horn, who is now director of the John J. Heldrich Center for Workforce Development at Rutgers University.
"Leave aside whatever study may have been, the governor’s veto should be sustained because this tax credit program is among the least effective of all the incentives that we have available, based on my experience," he said.
First, he said he wasn’t convinced the program attracted jobs that New Jersey wouldn’t have gotten anyway. Second, the jobs that are created are part-time, temporary positions that don't offer benefits.
"It's not a good expenditure of money in any circumstance, and in a situation where we have a serious budget deficit, which everyone acknowledges, it makes less sense," Van Horn said. "We should be creating permanent jobs that create family-sustaining wages for people."
Steve Gorelick, executive director of the New Jersey Motion Picture and Television Commission, declined to comment on any of the studies on the state’s film tax-incentive program. But even without that program, he said he will continue to perform his mandate.
“We’ll move ahead to bring productions to New Jersey, regardless,” Gorelick said.