Willfully Ignorant of Threats

Willfully Ignorant of Threats

Press-Enterprise Editorial Board & Mayor From “Jaws”: Both Willfully Ignorant of Threats

The Press Enterprise (Riverside, CA) wrote an editorial this week calling on Sacramento lawmakers to end the California film incentive rather than extend it.  Journalistic incompetence is one of my major pet peeves and this particular newspaper excels at it.  Last year the paper wrote a similar editorial which was masterfully ripped to shreds on the Film Works blog.  The editorial the paper wrote this week is vastly more incompetent than the last.  Why?  Because they base their entire argument on a single reading of the Legislative Analyst Office’s 8-page letter, which I lambasted earlier this week for its disgraceful “research”.  When an argument rests entirely on 8-pages of gross negligence, it’s not a pretty read.

Here are some key highlights from the editorial board’s argument:

A report last week from the state’s legislative analyst, however, should bring star-struck legislators back to reality. The analyst said that the tax credit is a net money loser for the state, costing California more than it delivers in benefits….

Blind faith that a tax break achieves its goal is not a good justification for sustaining that public outlay. California will not escape chronic budget shortfalls by recklessly dispensing taxpayer-financed goodies.

Blind faith? You have got to be kidding me. The only blind faith is on the part of this editorial in a hastily prepared 8-page “review” of two substantive and peer-reviewed studies totaling nearly 100 pages of comprehensive research done by actual economists. Calling the LAO letter a “study” is ridiculous.

An actual study would have included the actual production spending, employment counts and running them through an economic modeling program that accounts for things like labor spending, tax revenues and so on. Said report, in this paper’s ideal world, would then show a lower return based on things like actual research and quantitative data. The LAO did NONE of this. The LAO merely read two meticulously researched studies that took months of work to prepare and effectively said: “we think they are wrong…just because”.

The LAO did not even contact the authors of the other studies. Even on basic due diligence, the LAO failed. And yet, the editorial board listened to them. Blind faith indeed.  It’s obvious the editorial board did not read any of the reports they mentioned (LAEDC, UCLA, Milken, CRB) in their piece.  For example, they said “there is no way to know” whether productions would have shot in California without getting the tax credits:

There is no way to know, for example, whether the productions would have remained in the state even without a tax break. So California may simply be rewarding activity that would have taken place anyway.

“No way to know”?  Um, yes there is and we already know.  Had the editorial board actually read the UCLA report, they might have noticed that of the productions that did not get the incentive in prior years but that were ultimately produced, over 92% of their combined budgets were spent in other jurisdictions that did offer breaks.  Moreover, the UCLA study found that ALL of the big-budget films that did not get the incentive left for another state or nation that did offer one.  At this point, it’s clear the editorial board is guilty of gross negligence.  And it gets worse.

While they did not actually read anything other than the the LAO’s 8-page letter, the editorial board had the temerity to quote the California Research Bureau (CRB) report and make it sound like they had read it themselves:

The entertainment industry, however, argues that California needs the tax break to remain competitive with other states. Another study this month, by the nonprofit Milken Institute, said that the state should expand the film and TV tax break. Yet the California Research Bureau, an arm of the state library, last year reported that available data provided no clear evidence of “any significant damage to the state’s industry or economy” in the past decade from other states’ efforts to lure film and TV production away from California.

The same exact quote is on page 2 of the LAO letter.  The editorial board did not read the CRB report, they copy and pasted from the LAO.  Journalism at its finest!  The failed attempt to appear intelligent only magnifies their incompetence.  Again, had they read the CRB report, they would have seen some of the actual evidence of harm caused by runaway production.  For example, the CRB noted a frightening drop in wages for L.A.-based industry workers:

Los Angeles County movie industry employees earned, on average, 27 percent more per month in 2000 than their non-L.A. counterparts. In 2009, the average L.A. county industry employee earned 13 percent less per month than his non-L.A. counterpart.

One of the main reasons the CRB was hesitant to say the evidence was not clear is that they  were unknowingly misinterpreting on-location production data tracked by FilmL.A..  The CRB noted the aggregate number of Permitted Production Days (PPDs) actually increased while other states were enacting film incentives from 2003-2007:

In the aggregate, L.A. regional PPDs averaged more than 52,400 per year during 2003-07, when other states were adopting motion picture incentive policies. This compares to only 45,000 per year during 2000-02.

The aggregate number conceals the disastrous declines in the sectors that matter most, specifically feature films. The peak year for feature film activity was in 1996, when movies accounted for more than 30% of ALL production activity; TV accounted for just 21% and commercials 13%.  Not by coincidence, 1996 was also the year before the first film tax credits were implemented in Canada.  By 2011, movies barely accounted for 12% of all activity, while TV exploded to 38% and commercials 15.5%.  And while the CRB did note this shift, they misinterpreted the TV data:

The decline in feature film PPDs may in part reflect competitive pressures for feature film production arising from other states and foreign countries in recent years. However, those competing states’ subsidy programs do not explain the concomitant rises in television and other production shoots in the Los Angeles area.

What the CRB was not aware of, however, is that almost all of the growth in TV production came from reality TV programs.  With 7,200 PPDs in 2011, reality TV accounted for over 41% of the total 17,349 PPDs in the TV category.  Other states and nations tailor incentives to target scripted TV shows and movie productions over reality TV and commercials.

In sum, the productions that remain in California are the ones that spend the least money, pay the lowest wages and hire the fewest people.  This is precisely why they are not as valued by other competitors.  Californians still see productions on the street, but not the ones that matter most.  One $20 million film spends in weeks what a typical reality show spends on two entire seasons.  The CRB was made aware of the shift after they released the report.  For the Press Enterprise editorial board to claim there is “no clear evidence” of damage to California from “other states’ efforts” to lure runaway production with cash incentives is totally incorrect.

  To use an analogy from the movies,  runaway production is to California what the shark from Jaws was to Amityville.  The Press Enterprise editorial board is taking the same inept government position held by the Mayor in Jaws. The Mayor willfully ignored reality and the warnings of expert shark scientist Dr. Hooper (Richard Dreyfus) because he was not “familiar with our [Amityville] problems”.  Hooper’s response to the Mayor applies equally to the Press Enterprise, as both are utterly clueless:

“I think that I am familiar with the fact that you are going to ignore this particular problem until it swims up and BITES YOU ON THE ASS!”

We all lament the California budget crisis and cringe when teachers are laid off and parks are closed. But when, when, when is it going to occur people that one of the main reasons California has declining revenue is because it continues to allow the persistent erosion of its tax base to continue. At a certain point, what’s the point of even educating children when the jobs they aspire to fill are no longer in the state?

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