SANTA FE New Mexico will limit film production subsidies to $45 million a year under a proposal approved Saturday by a House committee after Democrats yielded to Republican demands to scale back the measure.
House Speaker Ben Lujan, D-Santa Fe, was unable to push through a higher subsidy limit, a reflection that Democrats no longer enjoy a solid majority in the House because of GOP gains in last years elections.
Its better than nothing, Lujan said as the Taxation and Revenue Committee unanimously endorsed the film subsidy measure. The bill goes to the House for debate and a possible vote.
The film industry opposes the revised measure.
This is a job killer, Eric Witt, executive director of the Motion Picture Association of New Mexico, said after the vote.
The bill was developed by House leaders as a potential compromise to free up about $25 million next year for budget increases sought by GOP Gov. Susana Martinez for schools, health care and public safety programs.
We will continue to review the bill, but the governor is encouraged that the film-reform legislation cuts the subsidy by roughly $25 million, which allows us to better protect core priorities such as classroom spending and health care for those most in need, said Scott Darnell, a spokesman for Martinez.
Darnell said, There is still work to be done on the budget to protect classroom spending in education. A $5.4 billion budget measure was pending in the House, with almost half of the money for public schools.
The state provides a 25 percent tax credit on expenditures by film and television projects in New Mexico. Martinez has advocated reducing the subsidy to 15 percent, saving about $25 million next year.
Democrats and film industry representatives have scrambled for weeks to find a middle-ground proposal that can win approval in the Legislature. Film industry supporters say a reduction in the rebate rate will discourage movie and television projects from coming to New Mexico.
On Friday, Lujan had suggested a $65 million yearly subsidy limit. That was rolled back to $60 million when Lujan outlined his bill Saturday to the committee. However, the measure failed on a 7-7 tie, with Republicans and one Democrat opposing it.
At some point your industry has to stand on its own two feet and not look to the rest of the state of New Mexico to hand out free dollars under the threat that youre going to leave if they go away, said House GOP Whip Donald Bratton of Hobbs.
A GOP lawmaker suggested an alternative of a $40 million cap and that failed on a similar tie vote. The committee took a break of nearly an hour, allowing Lujan to negotiate the $45 million proposal that was supported by Bratton and other Republicans on the panel. Witt said it was presented as a take-it-or-leave-it proposal to the film industry.
Although the measure will limit how much the state pays each year for subsidies, individual film projects shouldnt see reductions in their total subsidies. Thats because the state will spread its payments out to larger film projects over two or three years. A film production qualifying for rebates from $1 million to $5 million will be paid in equal installments over two years. There will be payments over three years for rebates of more than $5 million. Smaller projects, those getting subsidies of up to $1 million, will be paid in one year.
By deferring some subsidy payments to future years, lawmakers will free up about $25 million for budget increases in the coming fiscal year.
The states rebates have varied annually, hitting about $78 million three years ago and expected to be about $55 million this year.
If the legislation is enacted, Witt said, the state and film industry may face trouble after several years as deferred payments accumulate and exceed the annual $45 million limit. That would leave nothing as incentives for new film projects and raise questions how the state would meet its obligations for any payments more than $45 million in a single year.