Georgia House Speaker David Ralston said the state’s film tax credit program will continue despite two audits that show discrepancies in its financial impact.
Georgia Department of Audits and Accounts released a second report this week that points to an exaggeration of the state’s benefits from the incentive program meant to develop the film industry.
Ralston said he has not seen the audit but has read some of the early reports on it. Nonetheless, Ralston said the program is an employment lifeline for several Georgians.
“What we have to understand is the other end of the tax credit is Georgians working,” he said. “So if we need to make some tweaks in it, I am happy to sit down and make the changes that are true to the intent of the legislature in adopting it many years ago.”
Enacted in 2005, Georgia’s film tax credit gives a 20 percent tax incentive to production companies that spend at least $500,000 on selected projects in the state. Companies that promote the state in their work get an additional 10 percent credit. Thursday’s audit found that Georgia Department of Economic Development officials have inflated the impact of the film tax credit on the state economy.
“While Georgia’s film tax credit has increased the production of movies, television and interactive entertainment in the state, the information available to decision-makers regarding the credit’s impact has been incomplete and inaccurate,” Auditors wrote.
Auditors say the Department has been using figures that are double the standard metrics that calculates gross outcomes. The reported spending accumulated by the film industry in 2016 was $4.1 billion, and 23,816 jobs were filled. Another $500 million and an additional 5,000 jobs were driven by the film industry.
However, auditors say those figures do not paint the entire picture of the flow of revenue into the state.
“Assuming the forgone revenue had been spent on the primary categories in the 2016 budget (education and healthcare), the credit’s impact is reduced by $1.8 billion in output and 19,876 jobs,” auditors wrote. “The resulting impact of the film tax credit on the state’s economy was an estimated $2.8 billion and 9,130 jobs in 2016.”
Georgians acquired 80 percent of the jobs that resulted from the tax credits, but more than half of the wages were paid to nonresidents, according to auditors. Nonresident labor accounted for $245 million in credits in 2016.
Georgia Department of Economic Development Commissioner Padgett Wilson is standing by his department’s calculations.
Wilson said the state auditor’s approach “serves to undervalue the film tax credit’s impact.” The commissioner defended the department’s reporting procedures in a ten-page response to auditors.
In another report published earlier this week, auditors said about $60 million in tax credits should not have been applied.
“There are different audits out there. Some of them are more positive than others,” Ralston said. “I don’t know how they can have such different results.”