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California’s economy might see a boost from the state’s expanded film tax credits, but local lawmakers say it’s not enough.

Despite Gov. Gavin Newsom authorizing a $750-million film and TV tax credit program last summer, the impending merger between Paramount and Warner Bros., and the projected budget cuts that are expected to follow, has reignited fears about Hollywood jobs and U.S.-based productions.

“State programs cannot simply substitute for the kind of global, federal and competitive tax incentives that are needed to bring production back to American soil and stop its offshoring,” U.S. Sen. Adam Schiff (D-Calif.) said during a news conference Friday morning.

“We must act, and the urgency could not be greater,” he said. He revealed he is working on a bipartisan federal film incentive proposal that would be competitive with what other countries are offering for film productions.

He said the program isn’t about Hollywood’s stars; it’s about the jobs that productions create, including roles for set designers, carpenters and lighting crews.

“These are the people who make that magic happen. We want to keep those jobs here, and many of us are deeply concerned about what this potential merger will do to those jobs,” Schiff said.

Earlier this week, the California Film Commission revealed that 16 shows had recently received tax credits for filming in the state. The projects represent $871 million in qualified in-state spending and are expected to generate $1.3 billion in economic activity in California. Schiff said the state tax credit has generated more than $29.1 billion in motion picture production wages and supported more than 220,000 jobs.

Even as shows start to see gains in Southern California, Los Angeles film activity was still down 13.2% from July through September when compared with the same period in 2024. The downward trend extends the loss of 42,000 jobs in L.A. between 2022 and 2024, the continued suffering of local sound stages and the offshoring of productions internationally.

“Federal policymakers must act to level the playing field and make the U.S. film and television industry more competitive on the global stage,” said Matthew Loeb, the president of the International Alliance of Theatrical Stage Employees. “A globally competitive labor-based and tax incentive is. For us, production that supplements state incentives is essential to return and maintain film and television jobs in America.”

HBO Max’s medical drama “The Pitt” is filmed at one of Warner Bros. soundstages in Burbank and it’s one of the shows benefiting from California’s tax incentive.

Noah Wyle, the star and executive producer of the show, said during the news conference that “it’s really hard to shoot a TV show in Los Angeles, and it’s really expensive, prohibitively” — so adopting an economic model that allows productions to take full advantage of the California tax incentive was essential to “The Pitt” filming in L.A.

“As an Angeleno with generational roots to this city and as a seasoned member of its creative community, advocacy for Los Angeles-based production is something that is very close to my heart,” Wyle said.

“‘The Pitt’ has blessedly become proof of that speculative concept. I’m happy to report we’ll commence shooting season three this summer, and that a rising tide has indeed lifted all boats in season one under the 3.0 tax program,” he added.

The show received a 20% tax rebate on many above-the-line costs. The budget for one episode was approximately $6.6 million, so the show received a rebate of about $760,000 per episode. By the end of season one, the production was able to save over $11 million. Wyle estimated that the first season of “The Pitt” contributed around $125 million toward California’s gross domestic product.

Rep. Laura Friedman (D-Glendale), who is working with Schiff on production tax incentives, said that because California is already seeing benefits from the current program, there’s no reason it wouldn’t work nationally. Friedman added that tax incentives are a common practice among many industries in the U.S.

“Hollywood is not asking for special treatment. Whether it is computer chips, the energy sector or pharmaceuticals, this is something that is standard in the United States,” said Friedman. “In terms of our nation, Hollywood and its ability to tell the story of America, it is something worth saving.”

Paramount Skydance’s jubilation over its come-from-behind victory to claim Warner Bros. Discovery has entered a new phase:

Call it the deal-debt hangover.

Two major ratings agencies have raised concerns about Paramount’s credit because of the enormous debt the David Ellison-led company will have to shoulder — at least $79 billion — once it absorbs the larger Warner Bros. Discovery, bringing CNN, HBO, TBS and Cartoon Network into the Paramount fold.

Fitch Ratings said Monday that it placed Paramount on its “negative” ratings watch, and downgraded its credit to BB+ from BBB-, which puts the company’s credit into “junk” territory. Fitch said it took action due to “uncertainty” surrounding Paramount’s $110-billion deal for Warner Bros. Discovery, which the boards of both companies approved on Friday.

S&P Global Ratings took similar action.

To finance the Warner takeover, Ellison’s billionaire father, Larry Ellison, has agreed to guarantee the $45.7 billion in equity needed. Bank of America, Citibank and Apollo Global have agreed to provide Paramount with more than $54 billion in debt financing.

“Potential credit risks include the prospective debt-funded structure, Fitch’s expectation of materially elevated leverage and limited visibility on post-transaction financial policy and capital structure,” Fitch said.

Late last week, Paramount sent $2.8 billion to Netflix as a “termination fee” to officially end the streaming giant’s pursuit of Warner Bros. That payment paved the way for Warner and Paramount’s board to enter into the new merger agreement.

Paramount hopes the merger will be wrapped up by the end of September. It needs the approval of Warner Bros. Discovery shareholders and regulators, including the European Union.

Paramount executives acknowledged this week the new company would emerge with $79 billion in debt — a considerably higher total than what Warner Bros. Discovery had following its spinoff from AT&T. That 2022 transaction left Warner Bros. Discovery with nearly $55 billion of debt, a burden that led to endless waves of cost-cutting, including thousands of layoffs and dozens of canceled projects.

Warner still has $33.5 billion in debt, a lingering legacy that will be passed on to Paramount.

Paramount plans to restructure about $15 billion in Warner Bros. Discovery’s existing debt.

Paramount CEO David Ellison at a 2024 movie premiere for a Netflix show.

(Evan Agostini / Invision / AP)

Paramount told Wall Street it would find more than $6 billion in cost cuts or “synergies” within three years — a number that has weighed heavily on entertainment industry workers, particularly in Los Angeles.

Hollywood already is reeling from previous mergers in addition to a sharp pullback in film and television production locally as filmmakers chase tax credits offered overseas and in other states, including New York and New Jersey.

Some entertainment executives, including Netflix Co-Chief Executive Ted Sarandos, have speculated that Paramount will need to find more than $10 billion in cost cuts to make the math work. More recently, Sarandos went higher, telling Bloomberg News that Paramount may need $16 billion in cuts.

Cognizant of widespread fears about additional layoffs, Paramount Chief Operating Officer Andrew Gordon took steps this week to try to tamp down such concerns.

Gordon is a former Goldman Sachs banker and a former executive with RedBird Capital Partners, an investor in Paramount and the proposed Warner Bros. deal. He joined Paramount last August as part of the Ellison takeover.

During a conference call Monday with analysts, Gordon said Paramount would look beyond the workforce for cuts because the company wants to maintain its film and TV production levels.

Paramount plans to look for cost savings by consolidating the “technology stacks and cloud providers” for its streaming services, including Paramount+ and HBO Max, Gordon said. The company also would search for reductions in corporate overhead, marketing expenses, procurement, business services and “optimizing the combined real estate footprint.”

It’s unclear whether Paramount would sell the historic Melrose Avenue lot or simply centralize the sprawling operations onto the Warner Bros. and Paramount lots in Burbank and Hollywood.

Workers are scattered throughout the region.

HBO, owned by Warner Bros. Discovery, maintains its West Coast headquarters in Culver City; CBS television stations operate from CBS’ former lot off Radford Avenue in Studio City; and CBS Entertainment and Paramount cable channels executive teams are located in a high-rise off Gower Street and Sunset Boulevard, blocks from the Paramount movie studio lot.

“The combination of PSKY and WBD could create a materially stronger business than either individual entity,” Standard & Poor’s said in its note to investors. “However, this transaction presents unique challenges because it would involve the combination of three companies, with the smallest, Skydance, being the controlling entity.”

David Ellison’s production firm, Skydance Media, was the entity that bought Paramount, creating Paramount Skydance.

Ellison has not announced what the combined company will be called.

Paramount shares closed down more than 6% Tuesday to $12.45.

Warner Bros. Discovery fell 1% to $28.20. Netflix added less than 1% to close at $97.70.