SLAYING NEW MEXICO CORPORATE WELFARE’S SACREDEST COW

By D. Dowd Muska

Hollywood, your special status in Santa Fe may be coming to an end.

Late last month, in news that surely sent chills down the spines of millionaires and billionaires from Malibu to Bel Air, a leading lawmaker on New Mexico fiscal policy voiced her concern that in order to “help plug holes in education,” it was time to examine “all these tax expenditures” -- including the vast subsidies bestowed on film and television productions.

The fact that near-sacrosanct largesse to Hollywood is at least potentially on the chopping block indicates the seriousness of the Land of Enchantment’s ocean of red ink. Yet however it arrives, a reckoning for the costly, failed program pitched as “economic development” is long overdue.

Enjoying strong support from Republican and Democratic governors -- as well as most legislators from both parties -- “incentives” for film and television began to be adopted in the early 2000s. As then-Governor Bill Richardson told the Los Angeles Times in 2007: “We had a very simple strategy. Get ahead of every other state … throw the kitchen sink at accommodating film companies -- tax rebates, loans from the state, free state land, write-offs.”

Today, the subsidization scheme exists primarily as the misnamed “Film Production Tax Credit,” a refundable grant covering eligible expenses (not merely tax obligations) incurred for everything from feature films to television episodes, commercials to documentaries, animation to video games, visual effects to “standalone post-production.”

study by the University of Southern California found that New Mexico’s taxpayers had forked over more than $490 million to Hollywood by 2016, and in the ensuing years, the money continued to flow. In the current fiscal year, and the next four, the combined payment will be an expected $464 million.

As the chart below indicates, the jobs “created” did rise -- from a very small base -- immediately after elected officials made their first efforts to establish Tinseltown on the Rio Grande.

But employment in the industry peaked in 2008. Over the next 11 years, the number of New Mexicans earning a living in motion picture and video production rose and fell, never eclipsing the all-time apogee of 2,389.

Even worse, during the same period, in a development of which “Chilewood” boosters appear to be willfully unaware, a mountain of research from scholars paid by neither studios, unions, nor economic-development bureaucracies concluded that return on taxpayer “investment” in entertainment production was poor. Transparency and accountability were weak, if not nonexistent. The aforementioned USC study examined “job growth, wage growth, states’ share of the motion picture industry, and the industry’s output in each state.” It found that “the only benefits” of the programs were “short-term wage gains, mostly to people who already work in the industry. Job growth was almost nonexistent. Market share and industry output didn’t budge.” (Last year, in a stunning admission, the New Mexico Film Office disclosed that it had no “process to verify data given by productions” -- i.e., it simply accepted and publicized whatever it was told about the number of people employed, the amount of hours worked, etc.)

In 2017, Virginia’s Joint Legislative Audit and Review Commission reported: “The percentage of nationwide film production employment located in California and New York (67 percent) in 2016 has barely changed since 2001 (69 percent).” Three years later, data from the U.S. Bureau of Labor Statistics shows that the share of jobs located in the two states was basically the same: 65 percent.

Regardless of the facts, New Mexico’s political elites remained committed to studios, and to Local 480 of the International Alliance of Theatrical Stage Employees, the militantly political union that does so much to reward its friends in Santa Fe. In 2019, legislators approved a significant expansion of giveaways, including a lucrative perk for productions shot far from Albuquerque and Santa Fe, the settling-up of a “backlog” in unpaid credits, and a no-limit windfall for studios that “purchase or sign a 10-year lease for a qualified production facility.” 

But the surpluses of the spring of 2019 are but a distant memory as 2021 dawns. The economic and fiscal wreckage induced by a hysterical overreaction to COVID-19, and the daunting challenges of the state’s oil-and-gas industry, have New Mexico facing deficits for many fiscal years to come. 

Perhaps the truth that Hollywood hype never manifested into reality in the Land of Enchantment can no longer be ignored. For example, gasoline stations (7,738 workers), auto dealers (7,695), food manufacturers (6,136), engineering firms, (5,915), plumbing/HVAC contractors (5,415), department stores (5,059), and accounting/bookkeeping services (3,733) each employ more New Mexicans than film and television production. Their industries were never showered with taxpayer-backed freebies, glowing press releases, and gubernatorial councils. But their contributions to what is now a badly battered economy are far greater.

The cronyism and corruption of politicians picking winners and losers in the marketplace may not be affordable in a coronavirus-constrained fiscal environment. For budget-cutters looking to balance New Mexico’s books, Hollywood is a target-rich environment.