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Gavin Newsom confronts his Hollywood problem

Illustration by Claudine Hellmuth/POLITICO (source images via Getty and iStock)

Illustration by Claudine Hellmuth/POLITICO (source images via Getty and iStock)

LOS ANGELES — Gavin Newsom wants to claim the role of Hollywood’s superhero. But California’s iconic industry is so battered that even its governor may not be able to save it.

Newsom has made doubling the state’s film tax credit his No. 1 budget priority as he tries to lure back show business production that has fled in droves to other states and countries, even while he proposes slashing other pet causes such as expanded health care benefits.

It’s a clear bid to rewrite the “California crack-up” script that has transfixed conservative media — and President Donald Trump — and play the leading man role that woos production back to its homeland. But Newsom’s effort also calls attention to the yawning gulf between what the industry wants and what Sacramento can deliver. Already, there are fears that Newsom’s best efforts could amount to too little, too late.

Newsom has doggedly pursued support from the Los Angeles-based power players and their lavish political donations as he has climbed the ranks of California politics. But now, as his term’s expiration date approaches and he eyes a potential 2028 White House bid, the industry exodus has opened a window for Trump to claim the title of industry savior for himself. The president, Newsom’s frequent archnemesis, has disparaged the governor’s stewardship of his state’s signature industry as “grossly incompetent.”

California’s film tax credit, which has languished for years behind more lucrative offers from states like Georgia or overseas options like the U.K., could be a place for Newsom to cement his bonafides as Hollywood’s champion. The most active players lobbying for its expansion — a coalition of labor unions, studios and industry execs — feel “an enormous sense of gratitude” toward Newsom, said Scott Budnick, the film producer behind “The Hangover” and other blockbusters.

But there’s no guarantee that the heftier tax credit will make it through this fraught budget season unscathed. And even staunch supporters like Budnick acknowledge the effort, if successful, is only an initial step to a Hollywood course correction.

“My hope is we blow through this money, and we’re gonna have to go back to the governor for even more next year, and we can show that it’s an economic engine for the state as well,” he said.

Complicating Newsom’s Hollywood courtship is the pronounced funk that has pervaded the industry, which has been pummeled by a series of crises. The pandemic, the dual writers’ and actors’ strikes in 2023 and the historic Los Angeles wildfires in January have convulsed a town already rocked by changing business models. The industry-wide malaise has led some insiders to greet Newsom’s tax credit push with a weary shrug or a sense this is a fruitless endeavor.

“The time for this discussion was 10, 15, 20 years ago,” said Richard Rushfield, editorial director and columnist with The Ankler, an industry newsletter.

And even if he does notch a win with a doubled tax credit, it far from guarantees loyalty from a Hollywood political class that tends to prioritize other causes, such as LGBTQ+ issues or abortion rights, when backing a candidate.

“The overwhelming majority of Hollywood dollars that go into politics is not based on industry needs or priorities, but rather based on personal policy beliefs [and] values – often to the dismay of industry lobbyists,” said Donna Bojarsky, a longtime Democratic consultant and Hollywood fundraiser.

In other words, Newsom’s controversial podcast interview with conservative influencer Charlie Kirk may end up being more influential to Hollywood donor checkbooks than any budgetary mountains he moves for the film tax credit.

‘Depression-era level’ unemployment

As a Northern Californian, Newsom was never one of Hollywood’s own. But over the course of his governorship, he has diligently built bonds with industry heavy-hitters such as Netflix CEO Ted Sarandos, whom he frequently texts. Newsom met privately on Thursday with Jon Voight, the actor whom Trump named a “special ambassador” to Hollywood.

“He has real relationships with Hollywood and that makes a substantial difference, as opposed to the way [previous governor] Jerry Brown was a bit more of an outsider,” said Jay Sures, vice chair of United Talent Agency who was appointed by Newsom to the University of California Board of Regents. “He can pick up the phone and call just about any CEO and knows them on a first-name basis.”

Among the Hollywood donor crowd, Newsom has mostly been regarded as a strong standout among national Democrats considered potential 2028 contenders — though many in the industry, burned by Trump’s win in 2024, say they’re still shopping around for the next fresh face. Newsom’s vocal advocacy on national issues like abortion rights has won plaudits; his comments questioning the fairness of transgender athletes in girls’ sports have been less warmly received.

“Gavin has very solid support, but of course, he has his detractors too. And his more recent actions have mystified some,” Bojarsky said. “But generally people feel positively that he’s a sophisticated, charismatic politician that is willing to be out there and take risks.”

Lately, the wobbly state of the industry has become a major tentpole in Newsom’s Hollywood outreach.

FilmLA, which tracks the number of days movies, television shows and reality programs are shot in Los Angeles city and county, found that 2024 was the second-least productive year it had ever observed since its formation 30 years ago — only 2020, the height of the coronavirus pandemic, was worse.

“The levels of unemployment in this industry in Los Angeles are at Depression-era levels,” said Assemblymember Rick Chavez Zbur, one of the primary lawmakers championing the new film tax credit in the Legislature. “In some of the unions, they have had unemployment levels of 40 and 50 percent.”

Tax incentives are seen by the industry as a way to stop the bleeding — even if some economists say such credits can be revenue-losers for states. Proponents argue that in-state production has wide-reaching economic ripple effects that bolster not just the camera grips and makeup artists working on set, but dry cleaners, caterers and other small businesses that benefit from a local film shoot. The projects approved for the tax credit in California from 2020 to mid-2023 generated $7.3 billion in in-state economic activity, according to the California Film Commission.

In recent weeks, awareness of the crisis crossed into the broader zeitgeist. Even a recent episode of HBO’s acclaimed comedy “Hacks” included a joke about the film tax credit, complete with a Newsom name drop. A Newsom aide said he was amused by the shoutout and happy the issue had “broken through” — glossing over the fact that the industry’s clear frustration with state government was manifest as a punchline on a hit television show.

But it was a surprise social media missive from Trump that catapulted the issue to international attention, as the president touted his favorite policy tool, tariffs, as the solution to stanch the overseas production bleeding.

Caught off guard by Trump’s post, Newsom challenged the president on X to back a $7.5 billion federal tax incentive. Newsom, using the shorthand of finance and Silicon Valley, came up with the figure as a way to “10x” the $750 million tax break he was championing in California, according to the aide, who was granted anonymity to describe internal discussions.

After proposing that enormous sum, however, Newsom has not been deeply involved in the Washington efforts that have stirred to life now that Trump has shown at least some awareness of runaway production. The governor has had some conversations with figures in Washington who are working on a federal proposal, such as Rep. Laura Friedman, a Democrat from Los Angeles and a former film producer. But, Friedman said, the push to craft a new federal incentive and for California to expand its existing tax credits are “completely separate efforts.”

“His job is to get a budget allocation through the California Legislature … and it’s not a slam dunk that they’re going to get the money that he asked for,” said Friedman, who served eight years in the statehouse. “If my experience in the Legislature is any indication, he’s going to have a lot of work to do to make that happen. So he should be focusing there.”

‘Help is on the way’

Sacramento has always been a source of frustration for Hollywood, dating far earlier than Newsom’s tenure. There was a sense that California leaders did little to boost their crown-jewel industry, giving other states and countries a prime opportunity to poach the business by offering lavish incentives.

“We, for so many years, have sat on our laurels, assumed dominance in this area because of the history of Hollywood and expected that we didn’t need to do very much to retain this iconic industry,” said state Sen. Ben Allen, a Los Angeles Democrat who is one of the lead legislators involved in negotiations. “Unfortunately, dollars speak louder than tradition.”

One hurdle for advocates of a film tax credit is the perception that the program is a subsidy for glitzy Los Angeles studio execs and celebrities, a view that stoked regional rivalries with representatives from other parts of the state.

This time, Newsom put a marker down in October — days before he knew the outcome of the presidential election and months before the typical budget negotiating season — about his intention to more than double the tax incentive, which currently sits at $330 million.

“We made a decision … to put a stake in the ground and go,” said Dee Dee Myers, Newsom’s chief economic adviser. “That will give us time to make the case, to educate people, and it’s also a signal to the industry: ‘Hey, we’ve got your back, and help is on the way.’”

The goal of $750 million has remained unchanged, even as the state’s budget outlook darkened dramatically in recent months, setting off fierce battles for funding among competing Democratic interest groups.

Newsom and his legislative partners have tried to avoid the usual political tripwires. To entice lawmakers far from Hollywood’s center, they proposed a bonus for productions filmed outside of the 30-mile zone encircling Los Angeles. They made union entertainment workers, not studio bosses or celebrities, the face of their campaign. By portraying the incentive as a middle-class jobs program, they’ve largely neutralized objections from elsewhere in organized labor, which would otherwise target the tax credit as a corporate giveaway.

“This was the story of hundreds of union workers who have had to mortgage homes and foreclose on their homes and move to different states because of just how slow the business is,” said Budnick, an advocate for getting formerly incarcerated people into the pipeline for industry jobs.

Hollywood hopes collide with Sacramento reality

As budget negotiations careen toward a June 15 spending plan deadline, Newsom is trying to assure the anxious industry he’ll be able to deliver. His office reiterated on Thursday he is “fully committed” to securing a revamped $750 millon credit.

Even if Newsom is able to claim victory in the final gauntlet of budget negotiations, it’s far from assured that the effort will break through Hollywood’s current malaise.

panel of top studio executives at the ritzy Milken Global Issues conference last month offered a stark illustration of the gap between Hollywood’s expectations and the realities in Sacramento. Casey Bloys, who runs HBO, lamented how California’s tax credits — which are capped and distributed via lottery — compared to Georgia’s uncapped incentive program.

“Because it’s capped, you can’t plan,” Bloys said. “You have to get into a lottery, and you’re not sure if your show is going to get the tax break or not.”

But an uncapped tax credit was never in the cards in California, especially in this fraught budget year.

Author: Editors Desk, Melanie Mason

Source: Politico

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