Hollywood Battles Michigan's New Budget Chief

The battle over Michigan's film subsidy program has reached new urgency in the wake of Gov. Rick Snyder’s first budget proposal. His spending plan, released last week, calls for drastically reducing monetary favors to the film industry.

Since then, the headlines have screamed.

“Hollywood wary of Michigan; Fallout begins over proposed cut to tax incentives,” warned Variety on Feb. 22.

“Michigan's film industry to fade away along with tax incentives,” echoed MLive on Feb. 18.

Detroit Free Press columnist Mitch Albom has been one of the most strident supporters of the film incentives, which include a refundable tax subsidy of up to 42 percent for film or television production in the state. In his Feb. 20 column, Albom called himself a “person who helped create the film credits program.” He is now rallying the troops to preserve his creation.

Michigan Budget Director John Nixon is not surprised by the stepped-up efforts of Albom and others.

“The outcry you can anticipate,” said Nixon. “People in the film industry know how to rally troops. They’re professionals in PR. That’s what they are.”

In an interview with Michigan Capitol Confidential, Nixon said he also understands why many people are excited about the movie industry in Michigan. But he cautions that people need to understand what is at stake. 

“You just don’t get enough money back in the state coffers,” he said of the film subsidy program.

Right now, the state of Michigan writes a check to filmmakers for up to 42 percent of their spending in Michigan, minus the taxes they owe. Nixon says those taxes are minimal compared to the refund. For instance, if movie producers spend $100 million in Michigan, the state could end up giving these producers up to $42 million, and the $42 million has to come from somewhere.

Nixon said this is where the challenge lies: “All of a sudden, we have to cut that money out of the budget because it’s not going to be there.”

“The bottom line is, there’s no other place in state government where we just say, ‘we’re going to pay 42 percent, and let us know what the bill is,’” Nixon added. “We don’t do that with Medicaid. We don’t do that with any other program. We don’t just say, ‘send us the bill’ and we’ll pay 42 percent of it.”

And there’s no limit to what that bill could be under the existing program. If movie spending in Michigan reached $500 million, the state could be on the hook for more than $200 million. The program is structured so that it is possible for filmmakers to get back checks that exceed the cost of the taxes that they paid in the first place.

“And that’s $200 million that’s not going to Medicaid or to roads or other services provided by the state,” said Nixon.

Nixon stressed that the governor’s proposal to change the way the state does the movie business is not an attack on the film industry.

“The entertainment industry is a viable industry,” he said.

And he says it may be a good investment, but the mechanism by which the incentives are handled needs to make sense to the taxpayers and the state.

“I wouldn’t sit here and say we have to kill it or it’s a waste of time. We have to come up with a mechanism that doesn’t hurt the state the more successful they (the filmmakers) are. Whatever the number is, it’s coming at the expense of something else.”

A “Town Hall” meeting was scheduled to be held Feb. 24 to address the governor’s plans. Mitch Albom was one of several featured speakers on the schedule. The agenda was set to include the following:

"(V)arious evidence and informational points, legislators’ names and contact info, and strategic methods on conveying the most effective message possible to legislative officials and districts statewide to preserve Michigan's fledgling film industry."

Nixon defended the governor’s plan, which leaves intact $75 million already approved for film subsidies, and allows for another $25 million.

“Given the current climate, what we have proposed is very reasonable,” he said. “Given the current climate taking $100 million out of the budget when we have a billion and a half (deficit) out of budget shows we’re supportive of what’s going on. If they want to talk about a formula that makes sense, that brings money to the coffers, let’s sit down and talk about it.”

Ultimately, Nixon believes that whatever magic number ends up in the budget for film incentives, Hollywood will use it all.

As for the fervor of film industry supporters, he suggests they step back and realize just what they’re asking of taxpayers.

“(Film supporters) say we have to go, go, go! Where are we going to cut, cut, cut?”