Over at RealClearMarkets, I write today on one area where states are not cutting back: subsidies for filmmakers. While states raise taxes and cut programs that people actually use (like health care and education) they are maintaining or even growing corporate welfare programs for movie production:

New York Governor David Paterson (D) and his Democratic-controlled state legislature are trying to close the state’s $9 billion budget gap, and they don’t agree on much. They disagree about how much spending to cut and which taxes to raise (though all of them want to raise taxes on somebody). But they all agree on one thing: New York should authorize $420 million in tax subsidies for filmmakers, up from $350 million last year…

Supporters of the programs warn that movie productions will stop coming if states fall behind in subsidizing them. That’s probably true in some cases. But why does every state need to be a hotbed of movie production? Maine has no auto manufacturing plants, but it’s not out there offering to pay Ford 30% of the cost of each car built. This is because bribing people to do business in your state is not a sustainable way to grow the economy.

My RealClear piece focuses on the fact that these programs deliver little economic benefit and cost a lot of money that states don’t have. (Obviously, eliminating these programs won’t close an entire budget deficit, but New York’s new subsidy authorization is about 5% of its budget gap, which is non-trivial.) But the trouble with these programs goes beyond the fiscal implications.

Non-fiscal problem #1: As with any program that involves bureaucrats overseeing discretionary grants from the state, there is room for fraud and abuse. Iowa had to temporarily shut down its tax credit program last year after discovering that filmmakers had been reimbursed for millions in ineligible expenses. These included expenses incurred outside Iowa, and the purchase of luxury cars for film producers. (My former colleagues at the Tax Foundation covered this issue in an excellent report released in January.)

Non-fiscal problem #2: States are using their role as a financial partner in filmmaking to assert creative control. One typical requirement is that projects getting financial support may not paint the state in a negative light. New Mexico has an MPAA-like board that reviews R-rated films to decide whether they are too risqué to merit funding. (They also won’t fund movies that are “likely to outrage any of New Mexico’s various cultural communities.”)

Florida offers an extra credit equal to 5% of production costs for films that are “family-friendly.” Eligible films may not contain “smoking, sex, nudity, or vulgar or profane language” or “gratuitous violence.” (And, yes, there is a committee of bureaucrats charged with deciding whether a movie’s violence is gratuitous or, I suppose, necessary.) An effort to also restrict depiction of “nontraditional family values” was defeated in the legislature this year.

Asked about his proposal to insert the family values language, Rep. Stephen Precourt lamented the lack of programming similar to The Andy Griffith Show: “That’s when I grew up–the ’60s. That’s what life was like. I want Florida to be known for making those kinds of movies: Disney movies for kids and all that stuff.” In Florida, legislators aren’t just throwing your money at studio executives; they’re using it to pretend they are studio executives.