Film Incentives: The $50 Million Sequel

It might be a different year, but the story is the same. Michigan taxpayers will be paying $50 million in subsidies to millionaires and billionaires making movies in Michigan.

That comes after what initially appeared to be a move to reduce the subsidy. At the beginning of the year, Gov. Rick Snyder recommended cutting Michigan's film incentives in half, to $25 million.

The House plan didn't include any money for the film incentive program. The Senate wanted to spend $50 million on the incentives again.

Appropriations for the film incentives are one item within the general government budget. The full legislature does not vote on such items separately. It votes on omnibus (overall) appropriations bills that include multiple departmental budgets all rolled together.

When there are points of difference on legislation between the Senate and House, those differences are worked out in a conference committee. That means negotiations over the various aspects of the general government budget were left up to six lawmakers, three from the House and three from the Senate.

In the end, the negotiations didn't lead to a compromise on the film incentives, such as setting the amount at $13 million, $25 million, or $38 million. Instead, the Senate's original position prevailed and the amount is $50 million.

"These film subsidies are a classic case of the bipartisan political class serving their interests ahead of the people's," said Jack McHugh, senior legislative analyst at the Mackinac Center for Public Policy. "Special interest beneficiaries lobbied intensely to get this loot, but apparently no one in the room was working for the benefit of taxpayers."

How did the legislative process result in a repeat of the last year's $50 million level of spending on the film incentives? Michigan Capitol Confidential asked some of the conference committee members that question.

On May 23, the members of the conference committee for the general government budget were named. They were: Sen. John Pappageorge, R-Troy; Sen. Roger Kahn, R-Saginaw; Sen. Bert Johnson, D-Highland Park; Rep. Earl Poleski, R-Jackson; Rep Eileen Kowall, R- White Lake; and Rep. Fred Durhal, D-Detroit.

"I think the studios made a big push for them," Rep. Durhal said. "I was very cautious at first, but they won me over. I tend to believe that this is a new industry and I think we should help it out."

Rep. Durhal said there was almost no opposition to the film subsidy proposal.

"Maybe a little from the governor's office, but I was never approached by anybody who opposed them," he said. "If I don't see anyone on the other side, it makes me wonder if anyone is against it, or if they got bought off, or what . . . ?"

There might not have been any active lobbying against the film incentives in the Capitol, but outside, many have questioned whether it is wise or appropriate for government to subsidize the film industry.

Rep. Poleski said the decision on the $50 million for the film incentives was set by leadership of the House and Senate and the Snyder administration in the final budget targeting talks.

"That was all part of the target setting process on a $49 billion budget," Rep. Poleski said. "There are a lot of things that come out of the budget process that we may not like and other things we might like. For instance, we managed to do the transportation budget without increasing taxes.

"I'm not a big fan of the incentives," Rep. Poleski continued. "Why should we give incentives to them (the film industry)? We don't do that for most businesses. A lot of people in our caucus don't like the incentives. Our [the House's] budget didn't include them. That being said, some commitments were made and there were some people who invested based on those commitments. It's difficult to end them all at once. It might be better to phase them out."

Sen. Pappageorge is a supporter of the film incentives.

"You have to remember that when the governor decided on $25 million, that was before the May revenue estimating conference," Sen. Pappageorge said. "After that (which estimated an additional $483 million in revenues), there were suddenly a lot of things we could do that we hadn't previously believed we could.

"We have higher priorities," he said. "Education, fire and police will always get funded. But every year there are items you’d like to do that are on the bubble. This was one of those. After the May estimates, we could do it."

Pappageorge said he thinks the status of the incentives in next year's budget will depend on the economic outlook.

"If the economy is flat or worse, it could be difficult to fund them," he said. "You don't know ahead of time. Every year is different."

Sen. Pappageorge said it was important to note that the rules attached to the film incentives have been tightened.

"We have new regulations to ensure that they stay within Michigan," he said. "There are different rules this year. Nobody will be able to just come in with a van for a couple of months."

Sen. Johnson and Rep. Kowall did not respond to a request for comment.