Dear Governor Newsom:

We noted with great interest your proposal to extend California’s Film and Television Tax Credit Program and to further make the tax credits refundable for the first time ever. Bravo!

As other states implemented their own tax incentives to lure film and television production away from California, your predecessors wisely recognized that as much as we want to believe that California’s special qualities would overpower those incentives, the hard reality is that money talks and, well, you know the rest.

Governor Schwarzenegger won legislative approval of the first iteration of the program in 2009, with a modestly capped $100 million annual allocation and a sunset in just five years. Like you, Gov. Schwarzenegger faced skeptics who believed a tax credit like this should not be accommodated when the state was coping with a yawning budget deficit. (The state’s budget gap at that time was $42 billion, proportionately much higher than the challenge today.)

The results proved the skeptics wrong as film and television production returned to California, spurring an increase of the allocation to $330 million annually along with other revisions.

Since 2015, the California film and television tax credit has awarded $2.5 billion in tax credits. Private sector investment in California has been enormous, with 29 television series productions relocating to California and in-state expenditures of nearly $20 billion by those companies. Much of that spending supported good jobs in the entertainment industry, with 164,000 cast and crew hires attributed to the state’s tax credits.

In announcing your proposal, the executive director of the California Film Commission said that it “continues to deliver on our goal of retaining and growing in-state production,” and that the refundable tax credit “will give industry decision makers more options and the certainty they need to make long-term investments here in the Golden State. This will translate into more production-related jobs, spending and opportunity.”

By now you may be wondering why the leader of an agricultural trade association is going on and on about the state film and television production tax credit proposal and your proposal to improve and extend it.

Simple: California is losing agricultural investment to other states and foreign nations due to high state input and regulatory costs. The laws of economics do not operate differently for the agriculture industry as they do for the film and television industry. In fact, the verbatim statements made above to justify your film and television tax credit proposal are true for our state’s agriculture industry.

The logic being inescapable, we ask that you consider a refundable tax credit for agricultural producers that can “give industry decision makers more options and the certainty they need to make long-term investments here in the Golden State,” as doing so “will translate into more production-related jobs, spending and opportunity.”

California enacted legislation in 2016 to gradually reduce the threshold for overtime in agriculture field jobs from what it had long been—60 hours a week—to 40 hours a week. Despite the intent of the legislation, the economic cap on overtime hours created by this law has, in practice, significantly reduced the earnings of farm employees and undermined the productivity and competitiveness of California’s farmers. This law and many other factors have combined to cause 23.5 percent fall in net farm income since 2014.

With increasing frequency and urgency, my members tell me about the farms and facilities they are buying and building in other states and especially in Mexico and several South American countries. To a person they say they held back for as long as they could, but the economics of operating in California finally forced their hand.

No one in elected office wants to see this, but without concrete action it will only increase.

Fortunately, we can look to two states for a suggestion. Oregon followed California in passing a new overtime law for agriculture workers, phasing in the mandate over several years. Oregon’s legislature recognized the economic harm that would follow and established a refundable tax credit to agricultural employers to recover all or part of the wage increases attributed to overtime pay. In addition, the state provided a one-time financial aid boost to help farmers implement the new law.

Similarly, New York State’s new overtime law for agriculture workers includes an overtime tax credit that allows farmers to take 118 percent of the eligible overtime pay to help offset the new mandated costs.

California agriculture is nearly five times larger than Oregon and New York combined. The Democratic legislatures and governors of those states chose to openly acknowledge and mitigate the obvious wage-earning and farm-revenue consequences of their new agriculture overtime laws. California can and should do the same.

California agriculture is not the state’s largest economic sector. But it is certainly the most important industry for the millions of our fellow Californians who live and work in those immense regions where agriculture is the primary driver of economic and social health.

Our industry is hurting in so many ways right now, far more than anything the film and television industry experienced in the years leading up to California’s tax credit program to help bring it back. Please give this your consideration, setting aside the predictable petty political shrieks that will come in favor of sound economic policy.

Yours truly,

Dave Puglia

President and CEO

Western Growers