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Call ‘cut!’ on exorbitant film subsidies

New Mexico’s film subsidy program, which the Legislature recently increased from a maximum of $50 million to a maximum of $110 million annually, is excessive in relation to New Mexico’s small population and in comparison with other controversial public projects.

About two-thirds of the states have film subsidy programs, 25 of which have dollar caps. Most small states, including New Mexico’s neighbors, have very small programs. According to a January 2018 survey by the National Conference of State Legislatures (NCSL), the following are our neighbors’ annual caps: Colorado $1.25 million, Oklahoma $4 million, Nevada $10 million. Texas and Utah annually appropriate varying amounts. Texas appropriated $22 million and Utah $8.3 million in fiscal 2018. Arizona and Kansas have no subsidy programs.

Only three states have caps higher than New Mexico’s $110 million. California and New York’s caps are three and four times as high as New Mexico’s, but their populations are respectively 19 and nine times New Mexico’s. Louisiana’s cap is about 35% higher than New Mexico’s and its population is more than twice New Mexico’s.

With one exception, the states without program caps have been paying amounts which, proportional to their population, are less than New Mexico’s new cap. The exception is Georgia, five times the size of New Mexico, with subsidy payments reaching $800 million annually.

There is an important exemption, however, from New Mexico’s $110 million annual cap. Excluded are payments to companies that purchase or lease for 10 years a film production facility in New Mexico. In the five months since the end of the legislative session, two companies have announced their intention to acquire or lease such facilities. Probably, additional companies will take advantage of this exemption. Our nominal maximum of $110 million could easily become $200 million or more. At $170 million, our expenditures would be proportionately larger than Georgia’s and consequently the highest in the nation per capita. This seems exorbitant for a state with a very low per capita income and great public needs.

New Mexico’s subsidization of the film industry far exceeds other economic development efforts. State taxpayers pay 25% to 35% of the cost of making movies or TV productions in New Mexico. In private sector transactions, anyone paying such a substantial portion of the production cost would obtain an ownership interest in the product.

With the new cap, the film subsidy dwarfs other controversial public expenditures. The annual film subsidy is more than twice the total of Albuquerque’s share of the construction cost of the ART bus system. It is six or eight times as expensive as the annual taxpayer subsidy for the Rail Runner and four or five times the annual appropriations for the Spaceport. Of course, all substantial public expenditures create some jobs, but film production is not a particularly efficient job creator. Nor is it clear why this one profitable industry should be singled out for a rebate of more than twice the taxes it generates.

The legislative analysis of New Mexico’s film legislation calculates that state and local governments will recoup about 40 cents in tax receipts for every dollar expended on the subsidy, and each job created will cost the state about $39,000 annually. For similar amounts of money, the state could create additional jobs by simply hiring people to provide public services in public education, public safety, environmental protection or other fields. Doubtless there are hundreds of private businesses that would create jobs if the state annually paid $39,000, or even substantially less, to subsidize each job.

The NCSL reported in February 2018 that 13 states had terminated their film subsidy programs since 2009. Included are several Rocky Mountain States: Wyoming, Montana, Idaho and Alaska. Studies, findings and commentaries on film subsidies can be accessed by Googling “film subsidies analyzed.”

New Mexicans should not aspire to provide the highest subsidy per capita for an expensive taxpayer-funded illusion and should not applaud news of additional film projects taking state money. New Mexico should join the states that have provided very low caps or have terminated their subsidy programs.

Dick Minzner is a Democratic former member of the N.M. House of Representatives and former Secretary of Taxation and Revenue.

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