WILMINGTON — The North Carolina Film and Entertainment Grant has been awarded $15 million on top of its annual $31-million allocation by the state legislation.
Sen. Michael Lee (R-New Hanover County) said the additional money will go toward filling a gap between this year’s allocation and the program’s obligations to productions, calling it “technical corrections to the budget.” He added the state’s film incentive program needing more money is the result of undisciplined spending that now has to be reined in.
“Taxpayers and the industry both deserve a program that is managed responsibly and lives within the substantial resources the state provides,” Lee wrote in a statement to Port City Daily. “My focus now is accountability, so we are not back in this position a year from now.”
The North Carolina General Assembly’s budget, passed in early July, included $31 million for the program per the legislatures’ annual recurring commitment. The program works as a rebate, with production companies issued grants for qualifying expenses after a project wraps.
As is customary, the technical corrections bill followed the budget passage to make adjustments and amend mistakes found in the massive document. The bill, which was presented to the governor for his signature on Aug. 7, includes a one-time infusion of $15 million for the program. The bill doesn’t include stipulations for this additional funding.
However, instead of adding to available funding for the program to distribute to new productions, the money will cut down on existing obligations the program must now focus on due to a procedural change in its operations.
Lee, the Senate majority leader and advocate for the film incentive, explained the Department of Commerce has been running the film grant as a “cash-flow program” since 2019. Cash-flow refers to the ability to make awards not based on available funding at the moment of commitment but what will be available at pay-out.
“Once the program was held to what state law actually allows, there was a funding gap between what Commerce had previously committed and what had been appropriated,” Lee wrote in a statement to Port City Daily, adding the $15 million will cut down on that gap.
As a result of the operational change, the film grant can no longer make grants beyond funding it has available. After spending down much of its surplus funds that rolled over from previous years, The Department of Commerce will be capped at distributing $31 million each year, plus any unspent funds that have rolled over from previous years.
However, the Department of Commerce has roughly $89 million in obligations. Not all of them will come due this fiscal year; the program requires companies to file an audit in post-production to ensure money spent was in-state and on qualifying expenses.
Port City Daily reached out to Guy Gastor, director of the North Carolina Film Office, to ask about the program’s operations but he deferred comment to the Department of Commerce.
The department provided the following statement: “The North Carolina Film and Entertainment Grant Program is operating successfully and will meet its current grant award obligations. The jobs created from film production over the last several years validate how well the program has worked. We will continue to work with the General Assembly on ensuring future success of the program.”
Port City Daily discussed the grant program with several state officials who would only speak on background. One person said the department was only following directions from central legislative staff, who write bill texts on behalf of legislators.
One official said the film grant, which began in 2014, was in much of the same predicament it is today back in 2019. Multiple productions were interested in filming in the state and the value of their potential awards were expected to the programs revenues.
The 2014 appropriations bill established the program and does not stipulate whether it should be run as a cash-flow or not. It does state the Department of Commerce “shall adopt guidelines providing for the administration of the program.”
According to one state official, legislative staff told the Department of Commerce the bill’s intent was for the film grant to be run as a cash-flow program, in line with how the department runs its Job Development Investment Grant and One North Carolina program, also a cash-flow program.
If the program was to reach a point where obligations exceeded revenue, central legislative staff allegedly said the General Assembly would appropriate additional dollars, as is typical with the other cash-flow programs. However, there was no legislation making this backstop a guarantee.
There was an attempt to codify the Department of Commerce’s grant awards in the 2019 appropriations bill, but this provision did not pass.
It stated: “An agreement awarding a grant pursuant to this section for which the production company is entitled to payment for performance under the agreement is a binding obligation of the State and is not subject to State funds being appropriated by the General Assembly.”
Essentially, the provision would have promised payment to productions regardless of the status of the $31-million recurring allocation.
Even without the explicit language in the 2019 bill, Commerce continued its operations as a cash-flow program. Because of several disruptions to filming — the Covid-19 pandemic, the 148-day writer’s strike in 2023 and then the 118-day SAG-AFTRA actors strike thereafter — the program accrued a surplus of funds.
Seven years later, those funds have been spent down and central legislative staff have a different message, according to one state official: Stay in your funding lane.
According to one state official, the gap between this year’s available funding and obligations coming due this year is projected to be $7.4 million, though it could change if productions wrap early or late. The one-time infusion of $15 million will help cover it, with any unspent amount rolling over to next fiscal year.
Without additional money from the legislature or a disqualification or cancellation of productions currently in the pipeline, the film grant’s funding through fiscal years 2026-2027 and 2027-2028 is scheduled to be tied up in existing obligations. The allocation for fiscal year 2028-2029 could also potentially be affected.
Additionally, the program’s caps on how much a production can be awarded were increased in this year’s budget, in line with recommendations from industry workers and advocates. The budget increases the maximum grant available for movie productions from $7 million to $20 million and a television series grant from $15 million to $25 million per season.
Thus, the Department of Commerce will be able to issue higher awards to companies, but without an increase in the funding amount, the tranche of funds will deplete faster. These updated amounts will apply to new productions that receive an incentive, not currently awarded projects.
Port City Daily questioned state officials on whether a production previously looking to film in North Carolina has backed out due to the program’s current funding quandary. None were able to confirm as much is true.
“I know that there’s increasing awareness within the industry just what the ramifications might be,” one official said.
The popular NC Film Facebook group posted a call to action on Aug. 11 asking members to message Gov. Josh Stein about the status of the film grant.
“We are not seeking to assign blame. We are asking for your leadership to resolve this issue,” the post reads.
The call to action calls for a reversal of the administrative determination to allow the film grant program to operate as before.
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