Louisiana Governor Bobby Jindal, a potential Republican presidential candidate, is trying to close a $1.6 billion budget hole without touching as much as $415,000 per episode in tax breaks that may be due to “Duck Dynasty.”
The A&E television reality show takes part in the nation’s most generous entertainment-tax credit program. Jindal is proposing no changes, arguing that reducing such breaks is tantamount to raising taxes. The state approves enough incentives each year to make up at least $200 million in proposed cuts that led Louisiana State University to say that it may plan for insolvency.
“You’re talking about between $200 million and $250 million a year that goes out the door to TV and film producers to come here and shoot their pictures, in a state where money is scarce,” said Jan Moller, director of the Louisiana Budget Project, which advocates policies that benefit low- and moderate-income people. “It’s irresponsible to let this part of the budget continue running amok at a time when they’re talking about closing college campuses.”
Jindal, who is expected to announce his presidential decision after the Louisiana legislature adjourns in June, has positioned himself as an anti-tax, limited-government stalwart who has resisted tax increases as even other Republican governors reluctantly turned to them. His stand on the film-tax credit shows how his ideology has shaped his governance.
Louisiana’s tattered finances are a consequence of years of short-term patches to a structural gap between expenses and revenue and the recent sag in oil prices in the energy-producing state.
The budget crisis is hurting Jindal, said Scott McKay, who publishes the Hayride, a Republican blog, in Baton Rouge.
“If you are looking for a Republican nominee for 2016, he’s a bad choice,” McKay said. “Republicans are supposed to balance budgets.”
“The budget has never really been one of Bobby’s things.”
Popularity Plunge
Jindal, 43, became the first Indian-American governor in 2008 and was re-elected with 66 percent of the vote in 2011. His approval rating was 27 percent in March, according to a poll by Mississippi-based Triumph Campaigns.
Including his current proposed cuts, Jindal’s office says he has reduced state spending by $10 billion since 2008. Revenue still comes up short. Louisiana has been one of the slowest states to recover from the recession that ended in 2009. Its economic health eroded more than all but four other states, according to the Bloomberg Economic Evaluation of States.
The $1.6 billion shortfall, about 18 percent of the general fund, led Moody’s Investors Service to put a negative rating on Louisiana debt in February, in a report that said scaling back tax credits could close some of the gap.
Jindal requires tax increases to be matched with decreases, including those caused by reducing credits. The governor has proposed changing some incentives, ending payments that exceed their holders’ actual tax liabilities.
He proposed no changes to the film credit, which can pay more than a recipient owes if a company organizes itself such that it doesn’t owe Louisiana taxes.
Louisiana issued more than $1 billion in credits at an accelerating pace over the past 12 years. The state got 23 cents in revenue for every credit dollar it approved in 2013 and 2014, according to a March report.
Jindal’s revenue secretary, Tim Barfield, said the governor is open to film-credit changes.
“His position is that there will be no net increase in taxes,” Barfield said.
Louisiana, which was the site of the most English-language film productions in the U.S. in 2013, pioneered movie credits, approving the program in 2002. All but 13 states now have such programs, according to Film Production Capital, a New Orleans firm that brokers credits.
The credit has created more than 33,000 jobs, two-thirds of them in tourism, according to an industry-commissioned survey released in April. It found 14 percent of recent visitors had seen a Louisiana-based movie or TV show.
“It may sound weird that ‘Duck Dynasty’ can produce tourism, but that’s the kind of thing that sells,” said said Will French, president of the Louisiana Film Entertainment Association.
The show follows a family that made itself rich manufacturing duck calls in rural Louisiana. Its patriarch, Phil Robertson, is known for his Old Testament beard, Christian beliefs and for saying black people were happier before welfare.
Big Ask
Feeding Time Productions LLC, which produces the show, has submitted expenses for its first four seasons that would qualify it for $11 million in credits once approved, according to state data. That includes $4.6 million for the fourth season, or $415,000 per episode. None have yet been certified.
Louisiana offers movie makers credits for 30 percent of in- state spending and allows them to be sold to brokers.
Film-production companies set up as limited liability companies don’t owe corporate taxes in Louisiana. Most therefore sell their credits to someone that does. They are also allowed to sell them back to the state for 85 cents on the dollar.
The program invites excess, said Jeffrey Sadow, a Republican blogger and professor at Louisiana State University- Shreveport.
“You can stay in the best hotels in the state, fly in all sorts of people and pay them as much as you want and you are getting at least 85 percent of that back,” he said.
The program also fostered fraud.
A Hollywood producer, his ex-wife and a lawyer were found guilty in New Orleans federal court on April 27 for a scheme to falsify expenses to increase tax credits. A Baton Rouge producer was charged in March, and two others pleaded guilty in 2013 on similar charges.
Bribery charges imprisoned the former film-office director and the film executive and lawyer who payed him off. Dozens of New Orleans Saints players and coaches were sold almost $2 million in fake credits.
“We are quite busy with film-credit fraud,” said Stephen Street, the state’s inspector general. “It’s taken up quite a bit of our time.”
Despite Jindal’s silence, lawmakers are pushing for credit caps, a limit for the cost of out-of-state creative talent, ending give-backs for airfare and requiring that the state, not the industry, perform required audits.
The industry has endorsed some changes.
“We know we have a bad budget situation at the state and we want to find answers as much as anyone else,” French said.
To contact the reporter on this story: Margaret Newkirk in Atlanta at mnewkirk@bloomberg.net To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet