The State of Michigan has a $2.8 billion budget gap and unless lawmakers can agree on a budget by the end of the day today (Wednesday) the state will shut down.  Under these circumstances, many are questioning the prudence of continuing Michigan’s film tax incentive program, which is the most generous state program of its kind offering up to 42% reimbursement for production costs.  According to the Senate Fiscal Agency, the program is expected to cost the state $150 million next year.  But focusing merely on the costs is unhelpful.  The real question is: what are we getting for our money?

That question, unfortunately, is a little more difficult to answer but one that the Michigan Film Office tried to address in an Economic Impact Study it released last April – the one-year anniversary of the enactment of the program.  The study describes the effect of the program on Michigan-based productions and makes some projections for the future.  According to the study, during the first year of the program, 32 Michigan-based film productions were completed as opposed to only two in 2007.  Those 32 productions accounted for just over $65 million in direct spending in the state as compared with approximately $2 million in 2007.  Applying a multiplier to the dollars spent in Michigan, the authors estimated that the overall economic benefit to the State related to the completed films was close to $94 million.  The report also states that these productions employed 2,763 Michigan residents.

Based on other state programs, the study projects total direct production expenditures to climb to $187.7 million by 2012, with total state output of $335.6 million when accounting for the multiplier effect.  The author’s expect the multiplier to increase over time and, of course, there are a number of unmeasured economic impacts on the state from film production, including increased tourism.

–Matt