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House rejects cap on film tax credits

Proposal would continue unlimited reimbursements

BY: Bruce Mohl

THE MASSACHUSETTS HOUSE released a budget proposal on Wednesday that relies on far less new tax revenue than Gov. Deval Patrick’s plan, but the House initiative continues fully funding the film tax credit that the governor wants to rein in.

The film tax credit offers producers a credit equal to 25 percent of whatever they spend in Massachusetts shooting a film or commercial. In 2011, producers spent $176 million in the state, costing the state $44 million in tax credits. State officials estimate film spending in Massachusetts during 2012 rose to more than $300 million, which would generate tax credits of nearly $80 million.

Patrick, in his fiscal 2014 budget proposal, proposed capping the amount of tax revenue the state would forego each year from the film tax credit at $40 million. The House, which has adopted a more conservative stance than the governor on most fiscal matters, chose not to impose any cap in its budget proposal.

The House’s budget chief, Rep. Brian Dempsey, said reports compiled by the state Department of Revenue convinced him of the economic value of the film tax credit. “It has led to some additional investment here,” he said, apparently referring to a film studio under construction in Devens.

The Revenue Department report on 2011 indicates the film tax credit is drawing a growing number of films and commercials to the Bay State, but it says most of the spending is flowing back out of state to nonresidents and nonresident businesses. Of the $113.3 million that productions spent on wages, for example, 76 percent of the money went to nonresidents and just 24 percent to residents. About $54.3 million, or nearly half the total, was paid out in increments greater than $1 million, nearly all of it going to a handful of stars and directors who came here temporarily to shoot films.

What follows is a State House News Service report by Matt Murphy on the overall House budget proposal for fiscal 2014.

House leaders unveiled a $33.8 billion state budget proposal for fiscal 2014 on Wednesday, calling for a 3.9 percent increase in state spending that cuts $1 billion off Gov. Deval Patrick’s proposed budget but dedicates enough new revenue to UMass to avoid tuition and fee hikes for two years.

The budget approved Wednesday morning by the House Ways and Means Committee also boosts funding for local aid by $21.3 million over last year and increases public school aid by $25 per student, or $109.5 million.

Patrick and legislative leaders are embroiled in a tense debate over how high to raise taxes and competing proposals to generate between $500 million and $1.9 billion in new revenue for transportation and education. The budget from House Ways and Means counts on $500 million in new revenue from higher taxes on cigarettes, gas, and businesses. The House approved those tax hikes Monday and the Senate is gearing up to consider them.

Ways and Means Committee Chairman Rep. Brian Dempsey said the House plan directs $265 million of the new tax revenue to transportation, and uses the balance to invest in local aid, Chapter 70 education aid, and higher education. Asked if the new tax revenue was part of the solution to freezing UMass college tuition and fees, Dempsey said, “We wanted to make sure it was a priority.”

The House budget proposal, which will be debated by the House beginning April 22, would draw $350 million from the state’s stabilization account, or $50 million less than Patrick’s proposed spending from the “rainy day” fund. The budget also counts on $83.1 million in casino licensing revenues new to the budget process.

The House budget relies on $719.5 million in one-time revenues. Of the $838 million in estimated tax collection growth next fiscal year, the committee’s budget reports that $308 million will be consumed by increased costs of human and social services and $188 million in collective bargaining costs, leaving $530 million for other spending.

Dempsey’s budget level funds the special education circuit breaker and regional school transportation at $235.5 million and $45.5 million, respectively.

The Ways and Means budget proposes reforms and initiatives in the areas of health and human services oversight, higher education and early education and care, including a requirement that the Department of Transitional Assistance issue photo ID cards for electronic benefit transfer card recipients intended to weed out EBT fraud.

The budget plan dedicates $39 million in increased funding to the University of Massachusetts as part of strategy to achieve a 50 percent balance between state and university funding over the next two years.  UMass officials have said previously that a 50-50 split would be sufficient to freeze tuition and fee rates for two years.

State universities and community colleges will also see a bump, in part because of new gaming money earmarked for the community colleges.

The budget proposes a 10-member commission to review the financing model for higher education in Massachusetts and determine appropriate funding levels moving forward. The Ways and Means proposal calls for the same type of commission to review early education services and needs.

In the area of reforms to the Sex Offender Registry, the budget requires the Department of Early Education and Care to perform address matches of licensed care facilities and the registry in the wake of a report from Auditor Suzanne Bump raising concerns about a lack of oversight.

Level II sex offenders, whose identities are only available now upon request at local police stations, would be posted online, under a provision in the budget.

District attorneys will see 5 percent increases in their office budgets.

In response to another crisis over evidence tampering at state drug evidence laboratories, the Ways and Means budget proposes $3 million to hire 43 short-term employees and $846,000 to build out the headquarters of the State Police drug lab in Maynard to address a backlog of testing samples.

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