Clock is Ticking on Michigan's Film Subsidies

At 10:30 a.m. on Monday, June 29, House Bill 4122, which would kill the state’s film subsidy program, was presented to the office of Gov. Rick Snyder.

That officially started the clock ticking on the ultimate fate of the measure. Snyder could veto the bill, sign it into law, or take no action on it at all. If he chooses the latter, the bill becomes law 14 days after the date it was presented.

It's hard to argue that film subsidies have been anything but a loser for the state. Five years after the program was launched in 2008, after more than $450 million from Michigan taxpayers was appropriated to the coffers of film studios, there were fewer film jobs in the state than when it started. This poor record is mirrored by the experience of other states with similar programs.

“After wasting [hundreds of millions of dollars] chasing Hollywood producers, the legislature finally came to its senses and voted to end this program,” said James Hohman, the assistant director of fiscal policy with the Mackinac Center for Public Policy.

State lawmakers sent this bill to the governor, but the voices of Michigan voters might have played just as crucial a role. Few issues have seen as many twists and turns as film subsidies over the past seven months. The law authorizing them was scheduled to sunset at the end of 2014, but large bipartisan majorities in both the House and Senate voted for a reprieve last December.

Just weeks later, on Jan. 29 of this year, Rep. Dan Lauwers, R-Brockway, introduced House Bill 4122, taking another run at axing the Hollywood handouts. The House passed the bill on a 58-51 vote on March 11. Prospects for passage then dimmed when both Snyder and Senate Majority Leader Arlan Meekhof, R-West Olive, argued that ending the program so soon after extending it would set a bad precedent.

As these events were unfolding, Michigan voters were assessing Proposal 1, which asked them to approve a $2 billion tax hike for road repairs plus other spending increases. Another factor was introduced on Feb. 18, when the Department of Treasury dropped a budget bombshell: It disclosed that corporate tax credits previously handed out through the Michigan Economic Development Corporation, the state’s corporate welfare arm, had racked up an unfunded taxpayer liability totaling $9.38 billion, including more than $500 million due this year.

On May 5, Michigan voters rejected Proposal 1 by an 80-20 margin. Polling results released by the Mackinac Center for Public Policy and the Michigan Chamber of Commerce two weeks later showed 66 percent of voters favored diverting film subsidy money to road repairs.

Crunchtime for film subsidies came on June 18, when the Senate passed the bill to end the program on a 24-13 vote, after adding language from Meekhof allowing the state film office to fulfill current incentive contracts. Some see in this a chance that the program could be extended once again, but most assessments consider that improbable. The House quickly concurred with the Senate's tweak in a 63-46 vote, with all Republicans and one Democrat voting “yes.”

At various points it appeared the threat of a veto could become a bargaining chip in the ongoing road funding negotiations between the House, Senate and governor. Based on the current pace and likely direction of the process, this no longer seems likely.