ATLANTA — Georgia’s generous film tax credit is generating less economic impact for the state than its backers have reported, according to a newly released state audit.
The Georgia Department of Economic Development (DED) has used an inflated multiplier to calculate economic activity related to the credit, according to a report the state Department of Audits and Accounts released Thursday. As a result, the agency has reported misleading job numbers.
“Using the multiplier nearly doubles the impact of the credit,” the report stated.
Thursday’s report was the second from the state auditing agency this week criticizing Georgia’s largest tax credit program. An audit released on Tuesday accused the state departments of Revenue and Economic Development of lacking the controls necessary to prevent improper granting of credits to film production companies.
The Thursday report found that production companies spent $2.2 billion in 2016 to earn tax credits of $667 million.
The credit’s net economic impact that year was less than $3 billion and fewer than 10,000 jobs. However, those numbers rose to $4.1 billion and 23,816 jobs when adding the ripple effect of the credit on local businesses and workers.
“While these figures capture the impact of the projects supported by the credit, they do not consider the cost of the public subsidy of the industry and the resulting decrease in government spending,” the report stated.
The Department of Economic Development disagreed with the report’s findings.
“The Department of Economic Development and its consultants believe the methodology used by (the Department of Audits and Accounts) undervalues the film tax credit program’s impact on the economy, including the calculations of both the numbers and cost of direct, indirect and induced industry jobs,” DED spokeswoman Marie Gordon wrote in an e-mail.
“Because the report is a snapshot of data that is three to four years old, the growth of the Georgia screen sector and its relationship to the economy has rapidly outpaced the information from this period.”
“The film tax credit is a good deal for Georgia and its taxpayers,” said Kelsey Moore, executive director of industry group Georgia Screen Entertainment Coalition. “The state’s film industry has seen unbelievable growth since the credit was put in place, and taxpayers are now reaping the rewards of the billions of dollars the industry – and taxpayers – have invested. Reducing or eliminating the tax credit wouldn’t cause a surge in tax revenues; it would do the opposite. We’d lose an industry, we’d lose good jobs, we’d lose the huge economic impact of the productions and we’d lose the public and private sector investments we’ve made in the industry since 2008.”
With state revenues running well below expectations this year, the cost of the film tax credit will be a subject of debate for the General Assembly during the 2020 legislation session, which begins on Monday.
Georgia House Speaker David Ralston said Thursday he would oppose any efforts by budget cutters to abolish the credit.
“At the other end of that tax credit is Georgians working,” said Ralston, R-Blue Ridge. “If we need to make changes to it, I’m happy to have that discussion. But we must continue it.”
Industry leaders in Georgia have said they are willing to work with state government on reforms to the credit to prevent budget disruptions.
“Increasingly, leaders in the state’s film industry are Georgians who live and pay taxes here,” Moore said. “They care about the state’s success and fiscal health. The film industry is contributing to the state’s progress, and we want to be at the table on plans to keep it moving forward.”
The audit recommended the General Assembly cap the film tax credit to reduce the fiscal burden on the state and consider reducing the credit for wages paid to out-of-state workers, requiring periodic evaluations of the credit and allowing public disclosure of credit recipients and amounts.