Happy September,  I hope that this update finds you with memories of a healthy and enjoyable summer. A summer that was certainly unlike no other, attempting to make lemonade from the daily bag of lemons that COVID was delivering to us all. As of the beginning of September, more than 133,000 Pennsylvanians have been infected with COVID-19, with unfortunately more than 7,000 passing away. Businesses, school districts, state & local governments, and everyone in between are trying to deal with this new reality, along with anticipating what might come when flu season arrives in November and December. The country has people that have directly experienced COVID and are petrified of getting sick, and others feel this is just another illness that mostly affects those who are in poor health.

On August 31, Governor Tom Wolf renewed the state’s disaster declaration for the Covid-19 pandemic for another 90 days on Monday. “As we approach the six-month mark of this crisis, I continue to be amazed at the resiliency and strength shown by Pennsylvanians during this pandemic,” Wolf said in a statement. “We are going to continue to combat the health and economic effects of COVID-19, and the renewal of my disaster declaration will provide us with resources and support needed for this effort.” The declaration also comes at a time when the Pennsylvania House returns to voting session with a renewed effort to try to stop the Governor’s emergency powers by overriding Wolf’s veto of a previous bill that would allow the Legislature to force the governor end the disaster declaration. PennLive has more.

In a press release recently issued by Revenue Secretary Dan Hassell, Pennsylvania collected $2.5 billion in General Fund revenue in August, which was 8.9% more than expected. The Department of Revenue estimated the majority of revenue collected in August can be attributed to extending the due date to August 14 for corporations that had annual corporate net income tax payments due in April, May, June or July. Penn Live has more.

Expectations are the state budget deficit will be approximately $5 billion and many state lawmakers are hoping that federal funds will be made available to plug some or all of that gap. Depending on what financial relief comes from Washington,  that will determine how much in additional revenue will need to be generated or identified. Some options for new revenue being proposed includes adult use marijuana, and the Governor has recently called on legislators to legalize as a way to boost the economic recovery.

In other news, and in response to Covid-19, PennDOT is extending expiration dates for certain products including commercial driver licenses, learner’s permits and Hazardous Materials Endorsements. The extension for non-commercial driver licenses, photo identification cards, and camera cards ended Monday. Triblive.com has more. Governor Wolf today also recently announced his support for mandating a paid sick leave program for all PA workers, saying it can help workers avoid coming in sick and spreading diseases as well as reduce costs associated with employee turnover and absence. Democratic lawmakers acknowledged the difficulty they will face passing the legislation in the Republican-majority legislature. For more please see the Governor’s press release.

Over the last few weeks, Governor Wolf and the PA Legislature have been focused on COVID-19 related legislation. The initial bi-partisan work accomplished at the beginning of the state’s health emergency order has transitioned to partisan positions on the appropriate way to re-open the Commonwealth. Governor Wolf and the Democratic Caucuses of the House and Senate want to take a more cautious county-by-county approach to ensure there is appropriate testing and contract tracing capabilities while the House and Senate Republican Caucuses are pushing for individual industries to be re-opened regardless of geographical locations.

Governor Wolf’s May 1^st announcement that 24 counties in the northwest and north-central regions of the state can begin to re-open on May 8^th has shifted the focus to establishing what the Commonwealth’s “new normal” will be. As other parts of the state await word on when their counties will turn from red to yellow, the reality of the Commonwealth’s budget deficit is setting in.

The Independent Fiscal Office issued a report in early April stating that the coronavirus could cost Pennsylvania upwards of $2.7 billion in lost tax revenue over the next 15 months. That was the best case scenario, assuming that businesses can reopen by April 27 (which they did not). If the statewide shutdown remains in place for another six weeks, the IFO estimates the state would be facing a financial hit of $3.7 billion in lost revenues. The IFO’s report represents the first attempt to put a number to the financial toll the outbreak will take on the state’s finances. But, with so much uncertainty, the fiscal office acknowledges that its forecasts come with caveats and will likely need to be revised later in the year.

The Commonwealth’s April 2020 revenue collections were $2.16 billion (or 49.7%) below estimates according to PA Department of Revenue. Fiscal year-to-date General Fund collections total $27.5 billion which is $2.2 billion (or 7.4%) below estimate. The department estimates that approximately $1.7 billion of the $2.2 billion shortfall in April can be attributed to moving due dates for various taxes. It is expected the majority of the $1.7 billion will be made up when those tax payments occur in the next fiscal year. The additional $395.3 million of the April shortfall is due to reduced economic activity during the pandemic.

So, “what does all this mean?” It means there will be a lot of difficult decisions to be made when the Legislature and Governor negotiate the FY 20-21 budget. The most common thinking right now is that a short-term budget will be passed before the June 30^th deadline that will provide for funding until sometime in the Fall of 2020. This plan would allow for tax revenues to be collected over the summer with their new, pushed back due dates. Then, a new budget would need to be negotiated in the Fall/early Winter to ensure funding for the remaining of the Commonwealth’s fiscal year.

The House and Senate have been holding remote session (via zoom and proxy voting) and will continue to do so for the foreseeable future. Budget negotiations will begin in earnest very soon but at this time it is not known if a budget can be passed before the June 2^nd primary election (visit www.votespa.com to sign up for a mail-in ballot).

2020 has been rather interesting so far politically.

The top two Republicans in the state – Senate President Joe Scarnati and Speaker of the House Mike Turzai – both have announced they will NOT be seeking re-election. Those announcements have left many to wonder “why?” Why now? Is there a coincidence that both are leaving at the same time? Is it an indication that the writing is on the wall and a big Blue wave is on the horizon? Maybe. But I doubt it. Senator Scarnati has been very interested in returning to private business and enjoying life after Harrisburg. Speaker Turzai is rumored to have a new opportunity in the private sector that will require less travel away from his family, and that is very appealing to him as well. The departure of both Leaders will create tremendous opportunities for others within the ranks to move up.

So, that leads to the obvious questions: who will assume those roles and what impacts will there be on those caucuses. Assuming that the House and Senate both stay in Republican control, the second highest ranking members – Senate Majority Leader Jake Corman and House Majority Leader Bryan Cutler – are both the most likely options to ascend to the tops spots. The other possibilities would be: Senate Majority Appropriations Chair Pat Browne and Majority Whip John Gordner, and on the House side it may be House Majority Whip Kerry Benninghoff and Majority Appropriations Chair Stan Saylor. And as any of those members vacate their current leadership roles, others will jockey into those empty positions. The remainder of the year will be full of rumors, retirements, and losses I am sure.

What does all of that mean for the political characteristics of each chamber? I don’t see the Senate changing much with any of the members I previously identified. The House will likely become a bit less conservative with Mike Turzai leaving. That could mean more spending as a possibility. I stress COULD.

PAFIA, with the help and Support of Senators Camera Bartolotta & Costa, as well as Representatives Millard & Donatucci are forming the Film Caucus. PAFIA leadership will work diligently to get members to join the caucus and show their support of the film industry.

Briefly, on the budget side, the House and Senate are currently in the process of budget hearings and will return to session March 16^th and commence the process to a June 30^th budget deadline. With a primary election date of Tuesday, April 28^th, I expect a pretty quiet spring legislatively.

Yours in film,

Jim

2019…. A look back
In June of 2019, the state increased the film tax credit allocation nearly 10%, raising the annual cap to $70 million. On June 4th, PAFIA, along with QVC, the Motion Picture Association of America (MPAA), and our friends at the Pittsburgh and Philadelphia Film Offices, hosted a legislative reception in the Capitol. More than 50 elected officials attended, including the Senate Majority Leader Jake Corman. The event was co-hosted by Senators Camera Bartolotta and Tom Killion, along with Representatives Tim Briggs and Steve Barrar, who helped to make the event a great success. PAFIA looks forward to making this event bigger and better in 2020.

On October 31st, the House Democratic Policy Committee hosted a Film Tax Credit hearing at the Museum of the American Revolution in Philadelphia. Philadelphia Representatives Maria Donatucci and Joe Ciresi were the local “hosts” of the hearing. Past PAFIA Board Member Mike McCann was part of a panel during the hearing. PAFIA advocated for an increase to the annual allocation, which would provide for more certainty and predictability. The House Democratic members who attended were very enthusiastic about increasing the cap.

In addition, Mike McCann, M. Night Shyamalan provided testimony and spoke to how the decisions are being made about filming locations. He shared information about programs in Georgia and other states. Carrie Lepore from the Pennsylvania Film Office, the Motion Picture Association of America, and others testified in favor of the credit and the economic benefits to the state and local communities where productions are shot.

As we wrap up 2019, PAFIA would like to thank all the members of the association for your support. Those of you who are actively engaged can attest that PAFIA is making a difference in Harrisburg, as well as back home in the legislative districts. If you are involved, stay involved. If you are thinking about getting involved, PLEASE GET INVOLVED.

2020…. Looking Ahead
As the Legislature returns to session in January, PAFIA looks forward to building off of all the great things we did in 2019.

The Governor will provide his annual budget address on Tuesday, February 4th. Following the Governor’s Budget Address, the House and Senate will host 5 weeks of hearings on what the Governor has proposed. PAFIA will be advocating and monitoring all aspects of the process, but especially when the Department of Community and Economic Development and the Film Office testifies about the benefits of the film industry in the Commonwealth.

PAFIA will be ready to advocate and fight for a SIGNIFICANT increase to the program in 2020!

PAFIA wishes everyone a happy, healthy, and prosperous new year.

On Thursday, October 31, the House Democratic Policy Committee hosted a hearing on the Film Tax Credit at the Museum of the American Revolution in Philadelphia. Philadelphia Representative Maria Donatucci and Joe Ciresi were the local “hosts” of the hearing.

The Pennsylvania Film Industry Association (PAFIA) was invited to testify, and PAFIA’s very own Mike McCann was part of a panel. M. Night Shyamalan also provided testimony and spoke to how the decisions are being made about filming locations. He shared information about programs in Georgia and other states.

Mike McCann was fantastic and the hearing went well. Mike advocated for more certainty and predictability, which an increase to the annual allocation to the program would provide.  The House Democratic members who attended were very enthusiastic about increasing the cap.

The following House members attended:

Rep. Maria Donatucci
Rep. Joe Ciresi
Rep. Mike Sturla
Rep. Tim Briggs
Rep. Mark Longietti
Rep. Dan Williams
Rep. Steve McCarter
Rep. Movita Johnson-Harrell
Rep. Margo Davidson
Rep. Mary Jo Daley
Rep. Steve Malagari
Rep. Kristine Howard
Rep. Mike Driscoll

In addition to M. Night and Mike McCann, Carrie Lepore from the Pennsylvania Film Office, the Motion Picture Association of America, and others testified in favor of the credit and the economic benefits to the state and local communities where productions are shot.

The House and Senate returned to Harrisburg on Monday, November 18^th for the week. Both chambers are then scheduled to reconvene in December. The House and Senate have not been in session very much this Fall, so things have been fairly quiet.

Greetings PAFIA members, I hope this message finds you all well and busy with work this Fall.

The House and Senate returned to Harrisburg last week after summer recess. The House and Senate will return to session October 2. The House will be in session for 6 days in October, 6 days in November, and 6 days in December. The Senate, as of now, is scheduled to be in session 6 days in October, 3 days in November, and 3 days in December.

This fall, the legislature is expected to take up criminal justice reform, statute of limitations (Catholic Church scandal),  and possibly gun violence measures. It will likely be a quiet Fall.

On October 31, the House Democratic Policy Committee will host a policy hearing in Philadelphia on the film tax credit program. PAFIA will be testifying. If possible, please put this event on your schedule and try to attend to show your support.

Additional Information:
Thursday, October 31 at 10 a.m. at the Museum of the American Revolution, 101 South 3rd Street, Philadelphia, PA 19106

Friends in Film, Happy end of June.

As many of you know, the end of June represents the busiest time of the year in Harrisburg as legislators debate the annual spending for the next fiscal year.

On Thursday evening, the Senate passed the general appropriations bill (HB790), which now goes to the Governor to be signed. The approved budget is just under $34 billion, which reflects an increase of nearly $600 million from last year. Strong revenue collections throughout the year resulted in an approximate $834 million surplus, thus the remainder (just over $200 million) will go towards the state’s Rainy Day Fund. 

PAFIA is pleased to report that the state has increased the film tax credit allocation nearly 10%, raising the annual cap to $70 million. Thank you to members in the Senate and House who support the  film industry and advocated for the increase.  We look forward to growing our support in both chambers. And Thank you to the Pennsylvania Film Office, led by Carrie Lepore, and Governor Wolf for the support.

On June 4^th, PAFIA, along with QVC, the Motion Picture Association of America (MPAA), and our friends in the Pittsburgh and Philadelphia Film Offices, hosted a legislative reception in the Capitol. Over 50 elected officials attended, including the Senate Minority Leader Jake Corman. Senators Camera Bartolotta and Tom Killion, along with Representatives Tim Briggs and Steve Barrar helped to make the event a great success. PAFIA looks forward to making this event bigger, better, and held annually.

Please have a wonderful and safe summer, the House and Senate return to session in late September.

General Fund revenues surged in April, exceeding the official estimate for the month by $464.7 million, or 11.8 percent. Through 10 months of the fiscal year, revenues are now $828.2 million more than expected, or 2.9 percent; a major increase from March. Almost all tax types performed well this past month, with the real story coming from the personal income tax. Many taxpayers file their final payments in April, and these remittances exceeded the estimate by $328.5 million or 34.0 percent. One possible explanation is that taxpayers paid less than normal with their quarterly estimated payments in December and January, but made up the difference with the final payments in April. This shift is a significant change from usual patterns, but federal tax changes have affected normal taxpayer behavior.

In addition to the personal income tax, the other two largest tax categories had strong months. The corporate net income tax finished $76.1 million above estimate, or 31.1 percent – also driven by strong final payments. The sales tax saw collections $43.2 million above estimate, or 4.6 percent.

Looking ahead, May is a much smaller revenue month compared to March and April. The Independent Fiscal Office will issue a new revenue estimate for 2019/20 later in the month.

According the Senate Republican Leaders, “PA revenue collections have soared to a healthy surplus, thanks in part to Republican economic policies that have focused on holding down spending and rejecting proposed tax increases, according to Senate Republican leaders.” Senate President Pro Tempore Joe Scarnati (R-25), Senate Majority Leader Jake Corman (R-34) and Senate Appropriations Committee Chairman Pat Browne (R-16) said Republicans’ commitment to fiscal restraint, rather than supporting massive spending increases and higher taxes proposed by the governor, has improved Pennsylvania’s financial position and kept more money in taxpayers’ pockets.” 

That all said, any appetite by leaders to take this strong financial position and re-invest in tax credits programs like the film tax program, is undecided at this time. There is a strong push by many democrats to fund education more, both via capital improvements to facilities, but also putting more into the classroom. The Speaker of the House is seeking a significant increase in the Educational Improvement Tax Credit (EITC) allocation.

PAFIA will continue to advocate – arm in arm with the Pittsburgh and Philadelphia Film Offices – to increase the film tax credit, supporting the industry that continues to grow throughout the state.

While the temperatures outside are dropping, things are starting to heat up with the new session.

On Tuesday, January 15th, the Governor and Lieutenant Governor were each sworn in, which marks the beginning of a 4 year term for the new Lieutenant Governor and a second term for Governor Wolf. THe Inaugural party was held that evening at the Farm Show, and thousands of supporters enjoyed the party.

House and Senate leaders have announced Committee Chairmen and are starting to announce members of the committees. The House and Senate will be in session January 28-30, then again February 4-6, with the Governor providing his annual budget address on Tuesday, February 5th. The House and Senate will adjourn for more than a month for Appropriations Hearings. The House returns on March 11th and the Senate on March 18th.

On January 24th, the House and Senate hosted a joint hearing with the Performance Based Budget Board, where the Independent Fiscal Office presented its findings on three tax credit programs, including the film tax credit.

The IFO report provided the following recommendations:

• Policymakers need to establish explicit goals and objectives. A moderate tax credit can incentivize mobile productions to film in the state, but a much larger credit is necessary to attract long-term investment.
• The tax credit should be targeted more towards workers who reside in the state. That will increase the multiplier effect of the tax credit and the economic impact.
• The credit should be made refundable. The fees and discounts charged by third parties represent leakage and do not contribute to the economic output of the industry.
• Policymakers should consider different allocation pools for television and film productions. A separate allocation pool might also be used for small, independent productions.
• A temporary higher credit could be offered to television productions that relocate to the state.

Please share any questions or concerns with PAFIA at info@pafia.org

Happy December PAFIA members! I hope your holiday season will be full of joy and happiness.

Speaking of joy and happiness, 2018 was a productive year for advocacy of the Film Tax Credit (FTC) in Pennsylvania. Legislators from both sides of the aisle supported the program during the 2017/2018 annual budget process, voting overwhelmingly to fund the FTC at $65 million. Support from the General Assembly and the Wolf Administration is due in large part to the industry's growth and success, and the advocacy from PAFIA and its members.

As we bask in the success of 2018, we must quickly look towards 2019 and the 2019/2020 budget. The Governor is scheduled to give his budget address on Tuesday, February 5th at noon. It is yet to be seen what the revenues are for the year versus what was projected. There is optimism that the tax cuts at the Federal level will have generated more individual and business incomes (which means more income tax collected), as well as more revenue from increased spending (sales tax collections). However, there are concerns that growing pension and Medicaid costs will offset some of those gains and require either cuts or a proposal to find revenues elsewhere (i.e. new or increased taxes).

That all said, PAFIA will need your support as we continue to advocate with legislators and the Wolf Administration. As the result of retirements and election losses, there will be 45 new Senators and Representatives....45!!!! That means a significant amount of those 45 men and women don't know much or anything about the film industry or the film tax credit. It will be the job of PAFIA membership to share YOUR stories about what the film industry means to you and/or your family.

Please have a safe holiday season and best wishes for a healthy and prosperous new year. PAFIA looks forward to continued growth in 2019!