California Lawmakers Weigh Removing $750 Million Film Credit Cap

The California Assembly began debating whether to eliminate the state's annual cap on film and television incentives on Thursday, a move intended to halt the migration of production jobs to other regions. The proposal follows a period where the state already doubled its funding pool, yet industry officials report that the Los Angeles area continues to lose volume to competitors.

The current program limits total state spending to $750 million per year. Under this system, productions must apply during specific windows and compete based on a jobs ratio score. Betsy Beers, creative partner to Shonda Rhimes, testified that a new "Grey's Anatomy" spinoff set in West Texas failed to secure a credit initially due to a low score. When the network reapplied in the fall, the program was already oversubscribed. The show is now filming in Albuquerque.

Arlen Valdivia, vice president of state government affairs at the Motion Picture Association, stated that the program lacks the competitiveness and predictability needed to retain productions. He urged lawmakers to act to keep California viable for major studios. FilmLA, the local permitting agency, reported last week that production volume in the Los Angeles area continues to decline, even as the number of subsidized scripted TV shows increases.

Rick Chavez Zbur, chair of the Assembly Select Committee on Growing and Retaining the Creative Economy, acknowledged the difficulty of the budgetary challenge. He suggested either increasing or eliminating the cap in the next legislative session. "That is a heavy lift," Zbur said after the hearing. "But we're going to try this year to make as much progress as we can."

State economist Rowan Isaaks of the Legislative Analyst's Office provided data indicating that film credits return 20 to 50 cents for every dollar invested. He expressed skepticism about a method called dynamic scoring, which would account for broader economic benefits beyond the direct tax cost. "It's subject to a lot of uncertainty," Isaaks said. Stephen Cheung of the Los Angeles Economic Development Committee countered with research funded by the MPA, which found a return of $1.07 to state and local coffers.

The debate occurs against a backdrop of structural state deficits and deep cuts to Medicaid, which intensify competition for tax dollars. Assemblyman Nick Schultz proposed extending the program's 2030 expiration date and subsidizing above-the-line costs, such as actor and director salaries. He also suggested including commercials and game shows in the eligibility criteria. "Why should we be picking winners and losers?" Schultz asked. "Let's incentivize all of it to stay."

Lindsay Dougherty, leader of the Hollywood Teamsters, warned that state and local actions cannot rely on a potential 20% federal incentive currently under consideration by Congress. "We should not assume the work will return because federal policy changes," she said. The state raised the base credit from 20% to 35% last year while increasing the cap from $330 million to $750 million.