HARRISBURG -- The state's tax credit for movies shot in Pennsylvania got a bit chipped and dented during the lengthy battle over the 2009-10 budget, but it has survived for at least another two years.

For the current budget year, which ends June 30, 2010, the film credit totals $42 million, down from $75 million last year. For next fiscal year, which starts July 1, 2010, it will be $60 million.

Several of the state's tax credit programs were reduced during the impasse over the state's new $27.8 billion budget. Negotiations dragged on for 101 days and didn't end until Oct. 9, largely because of a sharp falloff in state revenues, which caused the previous fiscal year to end with a $3.2 billion deficit.

Some Republican senators opposed continuation of the film credit, which started three years ago at $10 million and was $75 million for the past two years. Opponents said that with the state's severe fiscal problems, it shouldn't give away revenue to "rich movie companies from Hollywood."

But supporters of the film tax credit, which include Gov. Ed Rendell and Pittsburgh Film Office Director Dawn Keezer, contend it has brought jobs and other economic benefits to the state and has helped it compete with other states for movies.

"Forty-one other states have some sort of incentives to attract films," Ms. Keezer said. "If Pennsylvania didn't renew its tax credit, we'd be done" as a site for movies, she said.

Even though the amount of the tax credit was reduced, Rendell aide Gary Tuma said, "It will still allow us to build upon the increasingly good relationship that Pennsylvania has established with the entertainment industry."

Ms. Keezer hopes the tax credit will return to $75 million in fiscal 2011-12, but that's still to be decided. She'd actually like the tax credit "uncapped," meaning placing no limit on the tax forgiveness for movie companies.

"Massachusetts is uncapped and about a dozen movies are being shot there now," she said. "New Mexico and Louisiana also are uncapped."

The tax credit amounts to a 25-cent offset in taxes for every dollar spent in the state. To qualify, a movie company must spend at least 60 percent of its production budget in Pennsylvania. Those expenses must be verified by an outside auditor and the state Revenue Department.

At the $75 million level of credits, Ms. Keezer said, it means movie companies spent at least $300 million in the state -- on hotels, food, rental cars and shopping as well as hiring film crews, makeup artists, actors and other costs.

The tax credits have become a major factor in attracting movie companies to the state, which shows that "this program has proven to be successful," said Jane Saul, director of the Pennsylvania Film Office, which is part of the Department of Community and Economic Development.

The Legislative Budget and Finance Committee did a study showing that in 2007-08, the tax credit generated nearly $525 million in statewide economic impact, including $18 million in state and local taxes and 4,000 jobs.

Currently, 20th Century Fox is making a movie called "Unstoppable" with Denzel Washington in northcentral Pennsylvania, Ms. Saul said. Two others are being shot in southwestern Pennsylvania: "Love and Other Drugs," starring Jake Gyllenhaal and Anne Hathaway, and "The Next Three Days," with Russell Crowe.

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