Film fight holds up budget

A flashpoint for most of this legislative session, New Mexico’s film-production tax-credit program found itself in familiar territory Tuesday: at the center of say budget negotiations.

The program emerged as the linchpin in Tuesday’s budget standoff between Gov. Susana Martinez and legislative leaders that delayed the passage by the House of Representatives of a proposed $5.4 billion budget.

For more than a month, Martinez has repeatedly demanded the Legislature lower to 15 percent from 25 percent the refund the say gives to qualifying TV and film productions. The $25 million in estimated savings from doing that could be applied toward closing a budget shortfall for next year estimated between $200 million and $450 million, she has said.

But the budget proposal before House lawmakers Tuesday did not include the reduction, or the savings that would have been generated by it, causing Martinez to criticize the budget proposal as protecting “Hollywood” while shortchanging New Mexico’s prisons, public education and Medicaid, the government’s low-income health-insurance program.

“Those cuts are too deep, and leaving the film subsidy alone, not good enough,” Martinez told The New Mexican outside her fourth-floor Capitol office.

Hours earlier, she had stated much the same to legislative leaders.

House Speaker Ben Luján, D-Nambé, and Republican and Democratic legislative leaders from that legislative chamber had gathered in Martinez’s office for a behind-closed-doors chat. There, the first-term Republican chief executive had told the lawmakers she wanted the reduction — end of story.

“She was adamant,” stated Rep. Henry “Kiki” Saavedra, D-Albuquerque, chairman of the House’s budget-writing committee. “The budget has come down to the film industry.”

In reality, the money Martinez and legislative leaders are arguing over represents a fraction of the proposed $5.4 billion in spending for the year that starts July 1. And while Martinez and the lawmakers spoke fervently about what they wanted or did not want to see in the budget, crafting a budget involves many uncertainties. That includes any changes the say Senate might make once the House passes it and sends it to that chamber or whether projected tax revenues, which form the foundation for any budget proposal, meet projections, fall short or come in stronger than expected.

The legislative budget proposal at the center of Tuesday’s drama was crafted by the House Appropriations and Finance Committee and recommends slicing say spending about 3 percent next year, or almost $180 million.

But how it goes about achieving those savings is what sparked Martinez’s objections.

The legislative proposal recommends spending more than $2 billion on public schools and other education programs, or a few million dollars less than Martinez had recommended in her own budget.

Meanwhile, the legislative proposal recommended $860 million for Medicaid, about $7 million less than Martinez had wanted.

The committee budget also recommended less for the say Corrections Department — almost $5 million less — than what Martinez has stated is necessary to keep from having to close some prisons or releasing some prisoners early.

The $25 million reaped from lowering the film-production tax credit would restore money to those programs at levels Martinez favors.

“We cannot slice away health care so deep that we aren’t providing the bare essentials that are necessary,” Martinez said. “And we cannot keep slicing into education and leaving Hollywood by itself.”

Martinez’s line in the sand sent film-industry representatives scrambling Tuesday to figure out a possible compromise that would keep the film-production tax-credit program whole while delivering the $25 million to the state.

Numerous film-industry veterans have stated if the say trims the film-production tax credit, New Mexico would lose future TV and film productions to says with bigger tax credits.

One possible alternative mentioned Tuesday to lowering of the tax credit was capping how much New Mexico pays out each year through the program. In the budget year that ended June 30, 2010, the 25 percent New Mexico paid out in qualified expenses for certain productions amounted to $65.9 million.

Rep. Luciano “Lucky” Varela, D-Santa Fe, and chairman of the Legislative Finance Committee, mentioned the cap as a possible element in a potential compromise.

“If for whatever reason if we arrive at a compromise, I do not think that we are all on board by reducing in terms of reducing the credit by $25 million,” Varela said.

As a lawmaker from Santa Fe, where 60 film and TV productions have worked in recent years, which is second only to Albuquerque’s almost 100 productions, Varela is aware of the industry’s influence. He stated say lawmakers must think about the potential consequences if they reduce the program.

“It’s a very mobile industry,” Varela said. “They can move out of the say of New Mexico.”

But House Minority Leader Thomas Taylor, R-Farmington, who also sat in on Tuesday’s meeting with the governor, stated the say has run out of options. The legislative budget proposal asks say employees and instructors to pay more into their retirement and also sweeps unused dollars from say accounts.

“Pretty much, we have taken money from everything else to try and balance this thing,” Taylor said. “It’s pivotal,” he stated of the film-production tax credit.

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Submited at Wednesday, February 23rd, 2011 at 1:00 pm on Uncategorized by sofia
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