More from the series
Kentucky’s tax problem
Kentucky’s legislature needs billions of dollars to pay down the state’s unfunded pension liabilities. As it happens, Kentucky essentially gives away billions of dollars every year through what are called “tax expenditures.” Will Kentucky lawmakers close some of these loopholes?
The head of the state’s film office told lawmakers Thursday that he does not have enough information for an economic-impact study of Kentucky’s booming film incentives program, which approves millions of dollars per month, but he could within the next year.
“Unfortunately, we don’t have a data set that’s deep enough to do a study,” Jay Hall, executive director of the Kentucky Office of Film and Tourism Development, told a panel of state legislators gathered at Asbury University to learn about the state’s nascent film industry.
“We should have that … I would say by June or July of 2018. That would give us all of the data set that we need to do an accurate study,” Hall said. “You can’t really do an accurate study if you don’t have enough data points. And we want to make sure that we’re not spending money to do a study that’s not giving us accurate data.”
Hall was questioned at the hearing by state Rep. Chris Harris, D-Forest Hills, who raised several points from a Herald-Leader article about the state’s film incentives that was published online earlier that day. The Herald-Leader reported that Kentucky has approved more than $90 million in incentives to subsidize movie and television projects since 2009, mostly over the last two years, with no clear idea of what economic return it can expect.
“You know, the biggest issue in Kentucky right now is our pension system,” Harris told Hall. “We’re in dire straits and we’re looking for money everywhere.”
Stephanie Stumbo, a Frankfort lobbyist for the state’s film industry, told Harris that film incentives don’t amount to much compared to the overall $13 billion in tax breaks and incentives that Kentucky gives away every year.
“The Kentucky film incentive program is one-one hundredth of one percent of the total tax expenditures in the state,” Stumbo said. “So, you know, I hate to use an old analogy, but you don’t want to swallow an elephant and choke on a gnat.”
Some other states that have studied the economic impact of their own film incentives found them to be lacking, returning less to the treasuries than they cost. Critics say the incentives sometimes pad the bottom lines of projects that would have been filmed anyway in exchange for short-term and often low-wage jobs. Facing budget pressures, a number of states that once offered film incentives have dropped or reduced them.
In his remarks to lawmakers, Hall said 20 film projects were made in Kentucky in 2016 alone. That large number was due to an expansion of the incentives the legislature approved in 2015 that made it easier for production companies to qualify and win more money, he said. Kentucky reimburses production companies for up to 35 percent of the cost of making movies, television shows, documentaries and commercials inside the state.
Based on what production companies report, the film industry’s investment in Kentucky from 2016 to the present has been $46 million, “supporting 552 direct jobs,” he said.
Stumbo complimented lawmakers for their “vision and courage” in offering film incentives. She then projected that if just 30 percent of the film projects approved for incentives this year are completed on time, the state could expect to see $86 million in new economic activity, 1,038 jobs and $8.6 million in new tax revenue over the next few years as a result.
“We got a good thing going now in Kentucky,” she said. “Give us some more time to aggressively market this program.”
Referring again to the Herald-Leader article, Harris asked if it’s true that some Kentucky corporations use state film incentives to produce their commercials. Yes, Hall replied, that’s one acceptable use for the incentives, and some “film projects” counted by his office are commercials.