Author(s): Becky J. A. Eason and Christopher M. Johnson

Publisher: Metropolitan Nashville Public Schools

Year: 2013

URL: http://musicmakesus.org/sites/musicmakesus.org/files/prelude-musicmakesus-baselineresearchreport-finalforweb_6.pdf

Topics: arts education, music

Methods: Analysis of administrative data for 6006 MNPS high school seniors graduating in 2012, survey of 71 music students in grades 5-12, focus groups with 93 music students in grades 5-12. Quantitative analysis involved an analysis of variance and structural equation modeling. Convenience samples were used for both the surveys and focus groups.

What it says: Music Makes Us is a public-private initiative in Metro Nashville public schools to improve music education through curriculum reform, strengthening existing offerings, forging partnerships with businesses and nonprofits, and improving infrastructure. The paper’s purpose is to establish a benchmark of music participation by middle and high school students and examine the potential impact of the changes to come on student achievement and engagement. Students who take music classes perform better on a range of measures including attendance, discipline reports, GPA, ACT scores, and graduation rates. Researchers theorize that music education leads to increased school engagement, which then leads to greater academic achievement. Qualitative inquiry supports the notion of a range of benefits for music education, including identity formation, habits of mind, skills transfer, mood improvement, and ability to conceptualize music’s role in students’ future life.

What I think about it: This study has some promising elements, but suffers from haphazard design and ultimately misses an opportunity to illuminate the relationship between music education and student outcomes in a meaningful way. The biggest problem is a failure to distinguish clearly between correlation and causation. While the quantitative analysis demonstrates convincingly that students who engage in more music classes achieve better outcomes, a highly plausible counter-hypothesis is that these students who are self-selecting into more music education are better equipped to succeed in the first place. The structural equation model comes tantalizingly close to teasing these factors apart by measuring the relationship between student characteristics (including 4th-grade standardized test scores) and music participation, and between music participation and both student engagement and academic achievement. However, unless I missed something, the model doesn’t contemplate the relationship between music participation and the outcomes of interest independent of student characteristics. Thus, the researchers’ conclusion that “increased music participation has important direct and indirect effects positive outcomes for Metro Schools students” seems ambitious. The survey and focus groups, selected by convenience sample and lacking demographic information or comparison to non-music students, don’t add that much of value to the study.

What it all means: This is a strange study – ostensibly commissioned as a baseline report, it nevertheless attempts to make claims about the value of music participation. With just a few tweaks to the design to more directly address the extent to which students participating in music classes succeed independently of their advantages or disadvantages, it could have been a notable contribution to the arts education literature. As it is, however, its value lies mostly in the baseline, descriptive functions that are its core purpose.

Photo by vancouverfilmschool. Some rights reserved.

About a year ago the New York Times ran a series of articles on corporate tax breaks, complete with a web-accessible database of state tax incentives for businesses. All in all, the Times discovered 1,874 state and local incentive programs that give out a combined $80.4 billion to corporations each year. To put those figures in perspective, the tax breaks doled out by Oklahoma and West Virginia are worth about one third of those states’ entire budgets. Manufacturing is the most highly subsidized industry, receiving about $25.5 billion in tax breaks annually, followed by agriculture and oil, gas, and mining. Fourth on the list? Surprisingly, it’s the motion picture industry, which nets about $1.5 billion in state and local tax credits per year.

What’s behind this $1.5 billion tax rebate for filmmakers? While industries such as agriculture have been subsidized for decades, state and local tax credits for film productions are relatively new. Louisiana was the first state to introduce such an incentive in 1991, and other states were slow to follow suit. Only four states offered incentives to movie producers in 2002, but once the idea caught on it spread like wildfire, and by 2010 forty-four states offered some form of incentive to filmmakers. The specifics vary from state to state, but typically the financial incentives (for which TV productions, industrial videos, commercials and sometimes even video games are eligible) consist of some combination of tax credits, cash rebates, employment rebates, sales tax and lodging exemptions, and fee-free use of shooting locations. In order to qualify, productions must generally satisfy certain conditions, such as spending some percentage of their total budget locally, shooting a certain percentage of the footage in-state, employing a certain quota of local residents, or exceeding a minimum amount of in-state spending. In addition, some states require that the action of the films take place in a local setting or even demand that the film depict their state in a positive light in order to qualify for tax credits.

To be clear, the film industry isn’t supported out of any particular concern for cinematic art, nor are politicians incentivizing the production of films because they think we’d be better off as a society if we had more movies and TV shows to watch. As is the case with many other corporate tax breaks, the main reason for offering tax credits for filmmakers is simply jobs, jobs, jobs. State officials don’t particularly care if a company is making movies, auto parts, or toothpaste—if it has the potential to create a lot of jobs for local residents, officials want those jobs in their legislative district rather than someone else’s. They are willing to dangle tax breaks as bait on the assumption that the jobs created by the firm will bring more money into the local economy than the government will lose by providing the tax break.

So how effective are the tax incentives for film and TV productions in generating jobs and/or revenue? That depends on whom you ask. Or who funds the research you’re looking at.

The ROI of film tax credits

Reports funded by the Motion Picture Association of America (MPAA), the main lobbying arm for the movie industry, consistently show a positive return on investment for state treasuries. For example, a recent study of the New York State Film Production Tax Credit commissioned by MPAA found that “for every $1.00 of credit distributed, the State and City received a combined $2.23 in taxes.” In Florida, a research firm that was hired by MPAA found that $118.7 million in tax credits yielded $140.44 million in 2011/12, for a more modest return of $1.18 to the dollar.

By contrast, a recent report on Louisiana’s Motion Picture Tax Credit by the State Auditor found that the state supported the film industry with $196.8 million in tax credits and only received $27 million in additional taxes in return (about $0.14 for every dollar spent), and the Massachusetts Department of Revenue found its return to be only marginally higher at $0.16 per dollar spent. A 2011 article by the Tax Foundation lists several other studies by state agencies and a few that were funded by MPAA exhibiting the same discrepancies.

How do these studies arrive at such vastly different numbers? To get some insight into this question, we can take a look at two conflicting reports on Massachusetts’ Film Industry Tax Incentives that were published this year: one by the Massachusetts Department of Revenue (mentioned above) and the other by HR&A Advisors for MPAA.

* This is not explicitly reported as the number of jobs created, but is implied by the statement, “Massachusetts motion picture production employment increased 46.1 percent from 1,630 jobs in 2006 [the year the tax incentives were introduced] to 2,380 jobs in 2011.”

As far as I can tell, the disparity, most notably in the estimated economic impact, results primarily from the following differences in the models and their underlying assumptions:

• Opportunity costs: Since the state is required to maintain a balanced budget, the Department of Revenue assumes that any incentives that are provided to the film industry have to be paid for by saving money somewhere else in the budget. So instead of just calculating the positive effect that the tax credits have on creating jobs, their analysis factors in the number of jobs that will be lost in other areas of the state’s budget due to cuts. Of course, these cuts have negative ripple effects throughout the economy just as the newly created jobs have a positive impact. By contrast, the MPAA report only looks at the positive effects of the new jobs that are created.
• Wages paid to non-residents: Both reports acknowledge that some of the jobs that are created by film and television productions in Massachusetts will be held by people whose primary residence is in another state; however, the manner in which the studies correct for that varies considerably. The MPAA report merely exempts “individual employee salaries over $1 million, as it is assumed the majority of these employees are non-residents, so multiplier effects associated with this spending are not realized within the Commonwealth.” The Department of Revenue similarly excludes all payments to recipients earning more than $1 million per production, but in addition it excludes 95% of all other wages paid to non-residents. The rationale is that most of the lodging, food, and incidental expenses for non-resident employees are paid for by the production company, so that only a small portion (estimated at 5%) of the non-resident workers’ paychecks gets spent in-state.
• “New” spending vs. total spending: The Massachusetts Department of Revenue is careful to exclude the production of TV shows and commercials that would have been produced in-state even in the absence of the incentives. This wasn’t of great consequence in 2011 (the latest year included in the study), since $174.6 million of the $176 million spent on TV and movie productions was deemed to be “new” (i.e., induced by the tax credit). However, in 2010 41% of the total film production spending ($29.5 million out of $71.6 million) would have been expected to take place in Massachusetts even if no tax credit had existed. (The large difference between 2010 and 2011 was attributed to the discontinuation of some long-running TV programs that were produced locally). The MPAA study doesn’t factor pre-existing film production into the equation, preferring to attribute all of the current film production activity to the incentive.

Despite the considerable differences between the studies’ findings and their disagreement about whether the incentives produce a net benefit for the state treasury, everyone agrees that the tax credits have a positive impact on the economy. For example, the 2013 audit in Louisiana found that every dollar of film tax credits resulted in $5.40 in economic output. However, that’s not really saying much, since almost any form of government spending is likely to have a positive impact on the economy. The question is how the impact of the tax credits compares to other things the state could have done with the money.

What about those jobs?

As mentioned above, in most cases the objective of these tax incentives isn’t necessarily revenue generation but job creation. Are film tax credits efficient means of creating jobs? One way to consider that question is how many tax dollars are being spent for each job that is created. According to the Department of Revenue, Massachusetts’s taxpayers had to fork out $128,575 in tax credits for each job that was created in the film industry in 2011. Seeing as the median wage for jobs created by the film industry in Massachusetts was $70,657, that doesn’t seem like a very good deal. The state could have employed almost twice as many people at the same income level if it had simply hired those people directly, instead of subsidizing motion picture companies. The picture looks somewhat better if one uses MPAA’s numbers, but it’s still not great. Assuming (generously) that all of the jobs that were created by TV and film productions between 2006 and 2011 can be attributed to the tax incentives, 750 jobs were created in 2011 at a cost of $37.9 million. That comes out to $50,533 in state spending for each new job. So even using MPAA’s more favorable numbers, it seems that the state paid more than two thirds of the wages for the film industry’s new employees.

Film-induced tourism

One factor we haven’t considered yet is the effect that film and television may have on tourism and the public perception of the locations where they are produced. There are certainly a number of cases in which blockbuster films have led to significant increases in tourism, as The Lord of the Rings trilogy did for New Zealand. And once local residents get past the street closures, traffic delays, and general nuisance that come with a major movie shoot, I’m sure many would agree that there’s some excitement in spotting Hollywood celebrities at local restaurants. There’s also some satisfaction to be gained from recognizing familiar landmarks on the big screen when you see movies that were shot in your hometown. In that sense, local film productions may promote a sense of pride in and attachment to a location, so that tax credits could be justified on the basis that they improve the quality of life for local residents. If nothing else, they give them something to talk about.

Both the tourism and public opinion arguments are valid reasons to support tax incentives for movies. It therefore seems appropriate that MPAA includes film-induced tourism in its recent reports on state tax incentives (in Florida and Massachusetts); however, the measurement of this effect remains problematic. Having consulted twelve representatives of Florida’s tourist industry, MPAA figures (conservatively, it claims) that 5% of all tourism in the state can be considered film-induced tourism and can therefore be added to the economic impact of the film tax incentives. The MPAA-commissioned study of Massachusetts’s film tax incentives uses a different methodology that was employed to assess the value of New Zealand’s exposure in the Lord of the Rings and Stockholm’s exposure in the Millennium trilogy. This approach equates each recognizable shot of the location where the film is set with the publicity that is achieved by a 30-second paid advertisement for the destination on primetime television. The cost of purchasing enough airtime on television to reach an equivalent number of viewers is then assumed to be the value of the advertising that the film provides for the location.

However, if tourism is the objective, the tax credits shouldn’t be granted to all movies indiscriminately. Only those that showcase the location prominently and identifiably should be eligible. I wouldn’t doubt that ABC’s Nashville is having a positive effect on the psyche of that city’s residents as well as on tourism and the local economy. As the assistant commissioner of communications and creative services for the Tennessee Department of Economic and Community Development noted, “You’re not only getting the 20-plus episodes per season”: every advertisement and preview for the TV show is essentially advertising Nashville. By contrast, it’s hard to imagine how shooting Homeland in Charlotte, NC, would do much to increase public awareness of North Carolina’s attractions, given that the show is supposed to be taking place in Washington, DC.  Incentive programs that require films to be set in-state and/or depict the location in a positive light make a lot of sense from this perspective (though the latter condition may seem dangerously close to censorship).

So where does that leave us?

In December, the Bureau of Economic Analysis, which among other things is responsible for determining our nation’s Gross Domestic Product, for the first time released a calculation of the economic value of the arts and cultural production in the United States. According to the BEA, arts and culture contributed $504 billion to our GDP in 2011. To put that in perspective, that’s almost twice the $289.9 billion generated by mining (which includes all oil and gas extraction). The motion picture industry alone added $83.2 billion to the US economy, which, believe it or not, is more than the total value added by automobile manufacturing. The motion picture industry has long been touting its economic significance to argue for more favorable tax treatment, and these latest numbers will only bolster its case.

Yet critics of film tax credits claim that these policies do nothing to stimulate the economy and merely pit states against each other in a race to the bottom. Even some people within the movie industry acknowledge that if the tax credits are the only thing that a certain location has going for it, business will likely move somewhere else as soon as the financial incentives are rolled back or some other state offers even bigger tax breaks. Once the states have foregone all tax revenue from movie producers in the rush to compete with other locations, the playing field will once again be even and the industry will settle where it was to begin with—the only difference being that the production companies no longer pay taxes and state budgets are even tighter than before.

I haven’t found any data to indicate whether or not the incentives are increasing due to competition between states, but from a theoretical perspective the race-to-the-bottom argument is compelling. Even if one believes the MPAA studies that show a positive return on the states’ investment, if the states keep raising their tax incentives to compete with their neighbors, the public benefits of attracting motion picture productions will eventually approach zero.

In the material I’ve reviewed for this article, there is little to suggest that the current incentives offered by state and local governments are optimal in any sense. I have yet to come across calculations that show that a certain level of tax incentives creates the greatest number of jobs per tax dollar forgone. So why do some states offer 15% tax rebates while others offer 20%? Are the expected returns really higher in some states than others, justifying the additional investment? Or are the higher tax incentives necessary in states where the conditions for filmmaking are otherwise so poor that no producers would go there if the rates were any lower? Since I haven’t been able to find a convincing rationale for the levels of the tax credits, I assume the levels are indeed set according to inter-state competition, which is consistent with the race to the bottom scenario. If that’s the case, I’d say it’s a poor justification for public spending. (This situation isn’t unique to the motion picture industry, by the way. The same doubts about inter-state competition and the race to the bottom hold true for all sorts of corporate tax breaks that try to bribe corporations into setting up shop – or keeping current plants open – in particular locations.)

So how might we improve the current system of incentivizing film and TV productions? Even if the economic argument offered up by MPAA doesn’t hold—and, personally, I’m inclined to believe the governments’ internal audits that show a net loss for the states—I don’t think one must abandon the idea of incentivizing motion pictures entirely. The system might just need to be improved to target those productions that are likely to generate the greatest public benefits.

The fact is, the current tax credits already target specific types of motion picture productions. Minimum requirements for the production budget and/or the amount of money that is spent in-state are presumably designed to ensure that the tax breaks go to big-budget productions that will employ a lot of people. The large corporations behind those productions are the ones most likely to respond to incentives, moving their operations to whichever state offers the lowest costs, whereas a small film production company in Massachusetts is likely to work in Massachusetts whether or not the state offers any incentive. However, for that same reason one might argue that the large corporations are precisely the wrong place to invest public money: they operate nationally (or internationally) and will fly in people from around the world to work on the production, so relatively few of the jobs created will go to local residents. Furthermore, as soon as another state offers bigger tax rebates, they’ll pack up shop and move there. Any spike in economic activity from a big-budget production coming to town is therefore likely to be short-lived. Wouldn’t it be better to give the tax breaks to smaller firms whose production budgets are too modest to fly in talent from out of state? Those productions might not hire a whole lot of people, but at least the paychecks will be going to local residents, and if the production does well and the company grows, that growth will happen in-state.

The one argument that does work in favor of giving tax breaks to big budget productions is their ability to reach a wide audience and potentially increase tourism or improve public opinion of a certain location. In order to fully endorse this approach, I’d need to see more credible research on the economic value of the exposure that shooting locations receive, preferably coupled with a greater capacity to predict which films are going to have a significant impact in that regard. As tempting as it is to reduce the conversation about film tax credits to a simple thumbs-up or thumbs-down, it would be smarter to consider how to determine which productions to incentivize with tax credits and where such tax expenditures would be wasted. That’s speaking from the perspective of job creation, of course. If the objective were to improve the quality of cinematic art, an entirely different set of selection criteria would be necessary.

ART AND THE GOVERNMENT

• Australia is relatively fresh off the adoption of a national cultural policy, and with that policy come calls for new ways to measure culture’s intrinsic value.
• Fractured Atlas has created a simple but useful infographic explaining what ObamaCare means to individuals, including artists.

MUSICAL CHAIRS

• Kris Tucker, Executive Director of the Washington State Arts Commission, has announced that she will step down in January. She has held the position since 1999; her successor will be chosen by the Governor following a search process led by the Commission.
• At Cincinnati-based ArtsWave, longtime president and CEO Mary McCullough-Hudson will step down next August. As part of a standing succession plan, current Chief Operating Officer Alecia Kintner is expected to become President and COO.
• The Charlotte Street Foundation in Kansas City has chosen a new executive director to succeed founder David Hughes: Julie Gordon Dalgleish took up the post this month.

BIG IDEAS

• Why we need a GiveWell for the arts: bioethics professor Peter Singer applauds “effective altruism” or evidence-based grantmaking, and, in the process, slams the idea of donating to an art museum. The article has provoked several responses from Adam Huttler, Janet Brown, Laura Zucker, and Linda Essig. Before we get tangled in semantics (isn’t “effectiveness” beside the point of true altruism?) GiveWell thoughtfully unpacks what the term means to them.
• Nonprofit executives both in and outside of the arts, meanwhile, aren’t putting much faith in data-driven strategies. According to a poll by Infogroup Nonprofit Solutions, executives consider “using data and analytics to drive strategy”  by far and away their least important nonprofit fundraising practice.
• The second batch of guests at the much-anticipated Arts Dinner-Vention Project  — Kristin Thomson, Salvador Acevado, Devon Smith, Lex Leifheit, Marc Bamuthi Joseph, and Meiyin Wang — weigh in on what a “new movement around the arts” would look like.
• Kerry Lengel explores the challenges and opportunities present in the battle for relevance and ticket sales for arts presenters in Arizona, and everywhere really.
• Think tanks in DC have increasingly focused on advancing a pre-existing agenda, raising funds, and political advocacy. Is there still a place for objective research in policy decisions? We’d like to think so.

ALL ABOUT THE BENJAMINS

• Three trustees of the Robert Rauschenberg Foundation claim the foundation owes them at least $60m; foundation staff asks, “What are they thinking?” Florida courts will decide.
• Amid the controversies over how little musicians are paid from streaming services, Doug Wolk takes a big-picture look at the revenue flows of sites like Spotify and Pandora to explain who is and isn’t getting paid by whom, and whether it really matters.
• Maryland’s Forum Theater, in an attempt to make its work more accessible, is allowing audience members to determine the price of their tickets next season. The strategy may prove to be wishful thinking, but raises the question of whether it’s more effective to ask audiences to “pay what they can” or to “pay what they each think a performance was worth.”

IN THE FIELD

• Amid national discussion surrounding recent lawsuits by unpaid interns, Fractured Atlas’s Jason Tseng offers concise takes on the history, legality, and possible future models for internships in the arts.
• Another Fractured Atlas staffer, Tim Cynova, interviewed 26 top professional leaders over the past several months about what it takes to attract and retain stellar staff members. He shares their responses in a video compilation here and will be releasing videos of each interview on his #StellarStaff website over the next month.
• Book lovers sound off on the Justice Department’s recent suit against Apple and publishing companies for conspiring to raise e-book prices. Meanwhile, independent bricks-and-mortar booksellers appear to be back on the upswing.
• Good news for cinephiles outside New York and LA: you may no longer need to invest in home theaters. A new website called Gathr allows users to band together to bring independent films to theaters across the country with a Kickstarter-like crowdsourcing engine.
• Bad news for cinephiles outside: drive-in theaters across the country are imperiled by the need to invest in expensive new digital projectors. Honda will save a few based on online votes; some theater operators are turning to the internet on their own to stay in business.
• Non-news for cinephiles: the general public is more complimentary of films than professional critics. How much more? The New York Times has a nifty analysis of Rotten Tomatoes scores from critics versus average moviegoers over the last ten years.

RESEARCH CORNER

• Look out, Rick Perry: the Cultural Data Project is coming to Texas.
• The Nonprofit Finance Fund and the Doris Duke Charitable Foundation have released two reports on their Leading for the Future experiment, which granted $1m in “change capital” to 10 leading arts organization to improve their capitalization. The summary report highlights factors that contributed to or limited success (stable finances and a well-informed board help; a major recession does not); the more interesting case studies of each organization offers detailed information on how they defined and evaluated success.
• NewMusicBox’s Rob Deemer follows up on our recent item about the NEA’s artist workforce research to argue that there should be a separate occupational category for composers. Meanwhile, the NEA has a new research report out on industrial design. The sector is large, growing, and apparently very versatile: nearly 40 percent of people named in design patents are also named in utility patents, implying they have a penchant for invention.
• A new report on the music industry in Nashville finds that the city has by far the highest number of music industry jobs per capita and the second-highest average salary after LA. This handy infographic breaks it down.
• If you’re looking to get up to speed on everything important that’s been written on the arts and Big Data so far, here’s where to start. Chris also has a review of “Counting What Counts: What Big Data Can Do for the Cultural Sector.”