Categories & Criteria for CNBC's Top States for Business 2013
We scored all 50 states on 55 measures of competitiveness developed with input from business groups including the National Association of Manufacturers and the Council on Competitiveness as well as the states themselves. States received points based on their rankings in each metric.
Then, we separated those metrics into 10 broad categories. We assign a point weighting to each category based on how frequently it is used as a selling point in state economic development marketing materials. That way, our study ranks the states based on the criteria they use to sell themselves.
Here are our categories and this year's weightings:
Cost of Doing Business (450 Points)
Cost is a major consideration when a company chooses a state. We looked at the state and local tax burden in each state, including individual income and property taxes, as well as business taxes and gasoline taxes. Utility costs can add up to a huge expense for business, and they vary widely by state. We also looked at the cost of wages, as well as rental costs for office, commercial and industrial space (rental cost information furnished by CoStar Group).
Economy (375 Points)
A solid economy is good for business. So is a diverse economy, with access to the biggest players in a variety of industries. We looked at basic indicators of economic activity, including growth, unemployment and the health of the residential real estate market. We measured each state's fiscal health by looking at their credit ratings and outlook, as well as state revenues as compared to budget projections. We also gave credit to states based on the number of major corporations located there.
Infrastructure & Transportation (350 Points)
Access to transportation in all its modes is key to getting your products to market and your people on the move. We measured the vitality of each state's transportation system by the quantity of goods shipped by air, waterways, roads and rail. We looked at the availability of air travel in each state, the quality of the roads, bridges and the water supply, as well as the time it takes to commute to work.
Workforce (300 Points)
Many states point with great pride to the quality and availability of their workers, as well as government-sponsored programs to train them. We rated states based on the education level of their workforce, as well as the numbers of available workers. We also considered union membership and the states' right-to-work laws. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, does not resonate with business. We also looked at the relative success of each state's worker training programs in placing their participants in jobs.
Quality of Life (300 Points)
The best places to do business are also the best places to live. We scored the states on several factors, including the crime rate, health care, local attractions, parks and recreation, as well as environmental quality.
Technology & Innovation (300 Points)
Succeeding in the new economy—or any economy—takes innovation. The top states for business prize innovation, nurture new ideas and have the infrastructure to support them. We evaluated the states on their support for innovation, the number of patents issued to their residents, the deployment of broadband services, and the record of high tech business formation. We also considered federal health and science research grants to the states.
Business Friendliness (200 Points)
Regulation and litigation are the bane of business. Sure, some of each is inevitable. But we graded the states on the "friendliness" of their regulatory frameworks to business, with particular attention to the legal and liability climates.
Education (150 Points)
Education and business go hand in hand. Not only do companies want to draw from an educated pool of workers, they also want to offer their employees a great place to raise a family. Higher education institutions offer companies a source to recruit new talent, as well as a partner in research and development. We looked at traditional measures of K-12 education including test scores, class size and spending. We also considered the number of higher education institutions in each state and long term trends for funding higher education.
Cost of Living (50 Points)
The cost of living helps drive the cost of doing business. From housing to food and energy, wages go further when the cost of living is low.
Access to Capital (25 Points)
Companies go where the money is, and venture capital flows to some states more than others. We looked at the flow of capital to states in absolute terms as well as in proportion to the size of their economies.
_ By CNBC's Scott Cohn. Follow him Twitter @ScottCohnCNBC.