California’s fight to keep film and television production from rolling out of state may be headed toward a much bigger—and much more politically difficult—question: should the state stop putting a ceiling on its production tax credit?
At a North Hollywood Assembly committee hearing, lawmakers, union representatives and industry advocates discussed changes to California’s $750 million film and TV incentive program. The most consequential proposal is also the hardest sell: increase the cap or remove it altogether, so projects are not shut out when a fixed pool of credits has already been claimed.
The discussion is about more than a larger percentage on a production budget. It is about certainty. In a location decision, certainty can be as valuable as the nominal size of an incentive. A production that cannot tell whether it will receive a credit may make plans elsewhere rather than wait for a competitive application process to resolve.
What California’s current credit does—and where the bottleneck sits
A film tax credit is a state incentive designed to make producing in California less expensive. California increased its base credit from 20% to 35% last year and expanded the program’s overall cap from $330 million to $750 million. Those are distinct levers: the first affects how generous an awarded credit can be, while the second limits the total amount the state can allocate.
The cap has practical consequences. Eligible projects apply during specified windows and are judged against others using a “jobs ratio” score. That framework aims to direct a limited resource toward productions expected to generate the strongest employment benefit relative to the credit requested. But a competitive system also means a qualifying project is not guaranteed help.
Betsy Beers, Shonda Rhimes’ creative partner, offered a specific illustration during the hearing. A new Grey’s Anatomy spinoff had been intended for Santa Clarita, but it did not receive a California credit and is now filming in Albuquerque. The project is set in West Texas. Beers said its initial application did not score high enough, and that when ABC tried again in the fall, the program had become oversubscribed and was no longer accepting applications.
That example does not establish that a single policy change would have kept the series in California. It does show the planning problem advocates are emphasizing: a capped program can run out before a production’s timing and application line up, leaving the incentive unavailable regardless of a company’s preference to work in the state.
The case for an uncapped program: reliability, not merely size
Several people at the hearing argued that the cap, rather than the credit rate alone, keeps California from matching rival production hubs. Georgia’s credit has no limit. New York can draw on allocations from future years, which functions as an uncapped credit. The comparison is central to the argument for change: producers can pursue locations with a clearer expectation that promised incentives will actually be accessible.
Related coverage includes California Weighs Removing $750M Film and TV Tax Credit Cap.
Arlen Valdivia of the Motion Picture Association described California’s program as insufficiently competitive and predictable to address the movement of production employment to other regions. The permitting agency FilmLA recently reported that Los Angeles-area production volume continues to decline, even as the portion of scripted television shows receiving a state subsidy has nearly doubled.
Those two points can coexist. More subsidized scripted programs as a share of the whole does not necessarily mean more total production. If the overall volume is falling, a larger share can still represent an industry working from a smaller base. That is why the hearing repeatedly returned to the question of whether the existing program is large and dependable enough to affect location choices at scale.
Rick Chavez Zbur, chair of the Assembly Select Committee on Growing and Retaining the Creative Economy in California, said he expects efforts to improve the system in the next legislative session. He characterized raising or eliminating the cap as a “heavy lift,” an apt description given the state’s broader fiscal conditions.
The hard part: a tax credit still competes with every other use of public money
The major counterweight to an unlimited credit is not a disagreement that screen production has economic value. It is the question of opportunity cost: what public spending, services or tax relief could be affected by devoting more state resources to a credit with no fixed maximum?
California is dealing with a structural deficit and deep cuts to Medicaid. Against that backdrop, an uncapped program is not simply an entertainment-industry policy. It is a statewide budget decision. John Harabedian, a committee member, framed the political reality directly: the case must persuade legislators whose districts are not in Los Angeles and who must decide on the best use of each dollar.
The debate becomes especially complicated because participants cited notably different return estimates. Rowan Isaaks, an economist with the state Legislative Analyst’s Office, pointed to research estimating film credits return 20 to 50 cents for every dollar invested by the state. Stephen Cheung, president of the Los Angeles Economic Development Committee, cited research finding a $1.07 return to state and local coffers for each dollar. That latter report was funded by the Motion Picture Association.
These figures should not be treated as directly interchangeable without more detail on how each study defines costs, benefits, geography and timing. A measure of receipts to state and local government is not necessarily the same thing as a measure of state-only fiscal return. Nor does a projected economic effect automatically equal money collected by the treasury. The gap between the estimates helps explain why expanding the credit will require more than a broad claim that production creates jobs.
What “dynamic scoring” means in this discussion
Zbur raised the possibility of “dynamic scoring” as a way to assess the proposal. In plain terms, it means looking beyond the credit’s headline cost and attempting to estimate wider effects: production spending, related employment and taxes generated by that activity. Supporters see that broader accounting as necessary because a credit’s upfront budgetary cost may not capture its total economic impact.
Isaaks urged caution, saying dynamic scoring is subject to substantial uncertainty. That caveat matters. Estimating what would have happened without an incentive requires a counterfactual—an informed reconstruction of whether a production would have come to California anyway, stayed because of the credit, or gone elsewhere. The more assumptions built into that reconstruction, the more debatable the final return estimate becomes.
For lawmakers, the practical challenge is not just choosing a favorable number. It is establishing a method credible enough to withstand scrutiny from colleagues deciding among competing priorities. An unlimited program would make that credibility even more important, because the fiscal exposure would no longer be controlled by a set allocation.
More targeted changes are also on the table
Removing the cap is not the only option discussed. Assemblyman Nick Schultz suggested extending the program’s current 2030 sunset date. A sunset date is the scheduled expiration of a law or program unless lawmakers renew it. Extending it could provide producers longer-term visibility without immediately committing the state to an uncapped pool.
Schultz and others also raised potential eligibility changes. One would support above-the-line costs, a budget term generally used for salaries and fees associated with major creative and senior production roles, including actors and directors. Another would allow commercials and game shows to participate. His argument was that the state should not be choosing which types of productions count as winners and losers when the policy goal is to retain work.
There is a tradeoff embedded in that approach as well. Broader eligibility could retain or attract a wider variety of work, but with a capped credit it could also create more competition for the same finite funds. Isaaks made a closely related point about the higher base credit: a more generous credit per project may mean fewer projects can be funded overall. California therefore has to balance depth against breadth—larger awards for individual productions versus a wider roster of recipients.
The state has already taken additional steps since the larger expansion backed by Gov. Gavin Newsom. The Legislature created a $10 million post-production incentive, moved to speed up studio rebates, and exempted independent-film credits from a $5 million credit cap. Each change addresses a different friction point: post-production work, timing of reimbursement, and limits affecting independent films.
A federal credit would not end the state-versus-state contest
Congress is considering a 20% nationwide incentive, but hearing participants argued that it should not be viewed as an automatic solution for California. A national policy could alter the broad economics of producing in the United States, yet states would still compete with their own credit structures and rules. Lindsay Dougherty, leader of the Hollywood Teamsters, warned against assuming work would simply return because federal policy changes.
That is the key policy distinction. A federal incentive, if enacted, could be shared across locations. California’s question is whether its state program has enough funding certainty, duration and flexibility to win productions in that environment.
The hearing did not produce a final plan, and lawmakers have acknowledged the fiscal obstacles. But it clarified the choices likely to shape the next session: retain a capped system and refine it; extend its lifespan; broaden the kinds of work it supports; raise the cap; or pursue the politically demanding case for no cap at all. For a production industry where schedules, financing and availability move quickly, the debate may ultimately hinge less on whether California wants the work and more on whether its incentive can be counted on when a decision has to be made.
For another look at the business decisions reshaping entertainment, see our coverage of Byron Allen’s Starz stake sale.
