Budget Cuts Hit Film, Video Game Incentives

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The high school football players pack the locker room before their first, big game — tensions high, the plot headed to climax — when Coach Eric Taylor first utters the now ubiquitous phrase “Clear eyes, full hearts, can’t lose.”

That scene from the pilot episode of Friday Night Lights was made possible in part by Texas taxpayers, who subsidized production costs for four of five seasons of the critically acclaimed show to the tune of $6.7 million.

Filmed entirely in the Lone Star State, the television show was among hundreds of beneficiaries of a decade-old incentive program whose budget was slashed this year by state lawmakers. Now, film industry advocates warn that such popular productions — and the jobs that come with them — will be scarcer in Texas. Nascent film and television projects, they say, likely will be lost to neighboring states like Louisiana and New Mexico that offer more generous — and consistent — taxpayer-backed enticements. 

Despite appeals from Gov. Greg Abbott, the Legislature cut the $95 million, two-year budget of the Moving Image Industry Incentive Program by more than 66 percent this year, leaving it with $32 million for the 2016-17 biennium.

The program's budget was last that low after the 2011 session, when the state was beset with a multi-billion dollar budget shortfall. This time around, though, it wasn’t that the state didn’t have enough money: With overflowing coffers, budget-conscious lawmakers left $18 billion unspent.

“We have been very successful over the last few years in attracting film and television and commercials to Texas and our ability to do that is diminished proportionately based on the lack of appropriations,” said Bill Hammond, CEO of the powerful Texas Association of Business, a major film industry ally. “It’s disappointing.”

The incentive program doesn’t just subsidize film, also doling out cash grants to video game developers and other industries with projects that are primarily produced in Texas with local workers. (Projects can be reimbursed up to 20 percent of their production costs, depending on their in-state expenses).

The Texas Film Commission, which oversees the program, ties the $168.4 million doled out to the creation of nearly 20,000 full-time jobs and $1.14 billion in spending.

Going into this session, industry advocates were hopeful that funding would be preserved or even increased after years of oscillation — despite the political climate.  

Some political experts peg the program’s dismal outcome to a pervasive, tea-party driven distaste for such taxpayer-funded assistance. And some industry advocates point to the departure of former Gov. Rick Perry — the No. 1 cheerleader for Texas' economic development endeavors.

But the incentive program faced perhaps an even bigger challenge when a fight erupted early in the legislative session between film and video game advocates. The film camp — with backing from the hotel and business lobby — began pushing lawmakers to create separate pots of money for film incentives and video game incentives. The gaming camp argued it was not the right time, calling the effort a "political miscalculation." 

Both sides still blame each other for the undesirable end result, but agree that the squabble ultimately undermined efforts to maintain funding that had grown to unprecedented levels during the previous legislative session.

In 2013, after the hotel and business lobby got involved, the Legislature gave the incentive program $95 million for the biennium. Industry reaction was instantaneous, Austin Film Society Executive Director Rebecca Campbell told the Tribune earlier this year, with annual income at Austin Studios increasing by 83 percent.

But the program’s new budget represents a dip in what one industry advocate described as a “roller coaster” dating back to its beginnings in 2005, when the Legislature created the program at Perry's behest but didn’t fund it.

All the “up and down” sends the wrong signal to studios and others, said Steve Belsky, president of a local film union and founding board member of the Texas Motion Picture Alliance.

“Those are big swings and what that says is: We don’t have any consistency of commitment,” he said. “And so they’re going to film in states with strong incentives.”

That may be true, but local industry advocates also are lucky that “the program ended up with any funding at all,” said Tom Foulkes, vice president for state government affairs at Entertainment Software Association, a D.C.-based industry group that represents several gaming companies with studios in Texas, including Nintendo.

Ending up with nothing "was a real possibility throughout the late stages of the process,” he continued, citing the intra-industry disagreement.

Political experts see the incentive program as falling victim this session to a tea party-fueled aversion to economic incentive programs that pick "winners and losers," a sentiment they say is not limited to Texas. (Responding to criticism, the Louisiana Legislature just placed a $180-million cap on the state’s own incentive program).

“I think there is a broader reconsideration of the efficacy of those kinds of incentives,” said Southern Methodist University political scientist Cal Jillson.

Given that rooting out “crony capitalism” was a key part of Abbott’s campaign, Rice University political scientist Mark Jones said the new governor “certainly wasn’t going to pick a fight with movement conservatives over what in the end is a relatively small amount of money.”

Abbott did not respond to requests for comment for this story.

But Lawrence Collins, a lobbyist for the film industry, notes that — despite all the noise about incentive programs — “the vast majority of them still exist,” aside from Perry's Emerging Technology Fund.

The moving image incentive program didn't face particularly strong opposition, Collins said, but suffered the loss of a spate of powerful lawmakers who had become allies of the film community — some who had initially dismissed the endeavor as “Hollywood nonsense,” Belsky, the film union leader, recalled.

“It’s not that (lawmakers), as a group, were interested in slashing it — they didn’t have any familiarity with what we’re doing,” Belsky said. “We probably could have worked harder to get Gov. Abbott’s attention, but we were sensitive to his busy calendar and the fact that this is never going to be his priority. It was a priority for Gov. Perry for a couple of reasons, but it didn’t transfer.”

Disclosure: Southern Methodist University and Rice University were corporate sponsors of The Texas Tribune in 2013. The Texas Association of Business was a sponsor in 2012. A complete list of Tribune donors and sponsors can be viewed here.