Connecticut’s legislature is currently considering HB 6929, a bill that would increase the state’s film tax credit, in the hopes of stimulating the state’s economy. All evidence points to Connecticut’s film tax credit being a bad investment. The revenue for expanding the film tax credit would be far better invested in tax credit scholarships for underprivileged children under HB 5424.
The Connecticut Center for Educational Excellence, in partnership with the Yankee Institute and a pool of generous donors, has begun offering low-income students in grades K-8 a annual $2,500 scholarship for approved applicants to any accredited private or parochial school in Connecticut. At the moment however, only a limited number of Connecticut households can make such financial contributions. HB 5424 would increase the number of households who can make such contributions.
The Office of Fiscal Analysis estimates the General Fund would lose $2.2 million in FY 2024 if HB 6929 passed, a deficit that would increase to $4.3 million in FY 2025. If instead $2.2 million was used for scholarships in increments of $2,500 per child, legislators could change the lives of 880 children by rewarding Connecticut residents for investing in the next generation.
Between 2006 and 2016, Connecticut’s credit has been one of the most generous nationwide, pouring $614 million into sustaining the film industry. That’s more on a per capita basis than New York, which gave out $2.6 billion. In all likelihood, all this spending has only moved money around Connecticut, with no positive economic impacts overall. Even these economic shifts have been far from impressive. Income for Connecticut film workers account for only about 1% of wages across the American film industry.
The program also has an uneven record well beyond its overfunding. Two years ago, Blue Sky Studios went belly up after receiving $30 million in tax credits annually from 2017-19, more than it was legally permitted to take. In fact, shortly after purchasing Blue Sky, The Walt Disney Company shut it down, after which it began using several of Blue Sky’s animated characters for new content on Disney+. In an industry dominated by large companies, Connecticut has little power to make the industry bow to its wishes, as it throws away money unnecessarily.
This illustrates the most basic of financial principles: diversification. When a pool of money goes to one place, the risk of a large negative return on investment is far greater. The staggering tax credit to Blue Sky suggests HB 6929’s $2.2 million credit increase could very well go to a single company. An uninspired risk for Connecticut, which fails to screen film company applicants for financial stability or the possible sale/bankruptcy of the company. Rather, the criteria are all based on “Production Expenses” of the film produced, with no guarantee of financial success (or any ability to fund future Connecticut salaries). As such, it is no surprise that Connecticut was caught flat-footed during the Blue Sky episode. In an age of drastic shifts in consumer entertainment choice, such as streaming, there is no such thing as a safe investment in the film industry. Uneven returns from the film credit should be expected.
If the legislature is truly inclined to spending on a tax credit, finding one more advantageous for our state and its people won’t be much of a challenge. And there is no group more deserving than Connecticut’s low-income children, trapped in school systems that deprive them of a fair chance of success later in life. Rather than advantaging Hollywood film companies, HB 5424 would provide individuals with a “a tax credit for donations made to nonprofit entities that provide educational access and opportunity scholarships.” The House Republican budget includes a similar proposal.
In financial language, investing in 880 different ventures makes much more sense than investing in a handful. And there is no long-term investment more important than a child’s future. Of course, the dividends won’t be immediate, but Connecticut residents would be much better off in future decades. Even better, if children leave public school to attend private or parochial school, Connecticut’s $21,310 per pupil spending (second highest in the country) could either be used to improve educational outcomes for the remaining students or else be saved by taxpayers.
By giving kids the chance to own their futures — and offering their parents a voice and a choice in their children’s education — HB 5424 is the superior financial and moral bill. Why would we invest in Hollywood over our own state’s children?