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The original inspiration for State of the Union came from stage and screen actress Helen Hayes. According to M-G-M press information, after meeting the authors during the presidential conventions of 1944, Hayes suggested they write a play about presidential candidates, which they then did in 1945. Opening in November 1945, State of the Union ran over two years on Broadway (765 performances) and won the 1946 Pulitzer Prize. According to M-G-M press information, Capra had sought to film State of the Union after seeing it three nights in a row during its initial Broadway run. Paramount had, however, already made a deal with the authors for the screen rights in March 1946, by which Paramount was required to release the film version before the 1948 presidential conventions. As reported in New York Times on December 29, 1946, Capra's Liberty Films acquired the film rights under a similar agreement to Paramount's: In addition to the release deadline, the authors received $300,000 plus 50% of the gross after production costs were recovered. Further, the screen rights were leased for ten years, not purchased outright.
As announced in Motion Picture Herald, the film was originally planned as an RKO release under Liberty's agreement with that studio, but according to Capra's autobiography, RKO backed away when the prospective budget hit $2,800,000. Modern sources cite RKO's desire to cast Gary Cooper in the "Grant Matthews" role as another contributing factor in their decision. Spencer Tracy was not only Capra's first choice for the role, he was the authors' choice as well. According to an item in Associated Press writer Bob Thomas' column, Tracy happily agreed, saying "I'm getting old and I've never done a picture with Capra." As such, a production and distribution deal was worked out between Liberty and M-G-M, allowing Capra not only the casting of Tracy, but Lansbury, Johnson and Stone, as well as other M-G-M contract players and crews. Recreating her role from the original Broadway cast was Maidel Turner as "Lulubelle Alexander."
Originally, Claudette Colbert was cast in the role of "Mary Matthews" at a salary of $200,000. On the Friday before shooting began, however, Colbert met with Capra about a provision missing in her contract. According to Hollywood Reporter and New York Times, Colbert felt there had been an oral agreement for a 5:00 PM stop time. Capra said there was not and refused to meet her demand. When she refused to relent, Capra dismissed her, even though shooting was set to begin the next Monday and $15,000 worth of Colbert's wardrobe had already been completed. Calling Tracy, Capra was informed that Hepburn might do the part, as she had been rehearsing the screenplay with him. Thus, Hepburn stepped into the role on less than a forty-eight hour notice.
During the film's production, Capra's Liberty Films was absorbed by Paramount Pictures in a complicated stock deal that netted the Liberty partners $5,000,000 in Paramount stock. Thus, according to New York Times, while the film was distributed by M-G-M, the "producer's share" became the property of Paramount. When Capra ended shooting in February 1948, he amazed many by being fifteen days ahead of schedule and $450,000 under budget. In numerous contemporary interviews, Capra credited his lack of financial involvement in the project for this savings, while in later years he acknowledged the professionalism of the cast.
While Capra and his screenwriters were almost completely faithful to the play, minor changes were made. The character of "Sam Thorndyke," for example, was only mentioned in the play. Aerial and outdoor sequences were also added. Second unit photography was done in San Antonio, Texas, as well as Van Nuys and the San Fernando Valley, CA. Lindsay and Crouse had made weekly changes in the play during the Broadway run to keep the play up to date in its political references. As stated in M-G-M press information, Capra hired Bill Henry, a Los Angeles news columnist and president of the Radio Correspondents' Association of Washington, as a political advisor to keep him abreast of such matters. Plans were also made to "wild-track" certain sections of the soundtrack, allowing for different political references to be added to prints sent to various regions of the country.
During shooting, the House Committee on Un-American Activities held its hearings in Hollywood where Menjou, an acknowledged conservative, testified as a "friendly" witness. According to several contemporary and modern sources, Hepburn, a liberal, remained cordial to Menjou when shooting scenes with him but refused to speak to him otherwise. According to an M-G-M News item, prior to the film's release, Capra test-screened the film in four different cities, attempting to get responses to the film from urban, rural, university and female audiences. The film was shown four times in each city, whose identities remain undisclosed.
The film's premiere was held at the M-G-M Capital Theater in Washington, D.C. under the sponsorship of the White House Correspondents Association with President Harry Truman attending. After the 1948 elections, it was argued in Variety that this premiere helped re-elect Truman by making him change his campaign strategy and believe once again in himself, despite the opposition he faced from members of his own political party. Unlike other Capra films, State of the Union was not considered an outstanding critical or financial success, though it managed to place thirteenth on the 1948 box office scroll, acquiring $3,500,000 in domestic rentals. On most prints currently available, both Hepburn and Menjou's first names and director of photography George J. Folsey's last name are misspelled in the opening credits. Modern source credits also include Edwin B. Willis as a set decorator along with Kuri.