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States bring renewed swagger to Top States 2013

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The national economy is recovering. State finances are improving.

This is where the competition for business—and jobs—gets interesting.

CNBC has been ranking all 50 states for competitiveness since 2007. Since then, states have endured a financial crisis and a wrenching recession; they've seen a stimulus windfall and winds of political change sweeping America's statehouses. States have staggered from a real estate bust and swaggered in a domestic energy boom.

America's Top States for Business 2013, our seventh annual study, comes as the states continue to shake off the effects of the Great Recession. Slowly but surely, they are getting back in fighting shape—fighting for jobs, that is.

The National Conference of State Legislatures, which monitors the states' economic health, reports in its annual "Spring Budget Update" that the general outlook among legislative fiscal officials "is one of stability, with a dose of uncertainty, as states continue to plod their way through an extended economic recovery."


That plodding is slowly giving way to a little spring in the states' collective step. States are tweaking the sales pitches they aim at business, reflecting greater confidence in economically sensitive measures of their business climates. And because our unique formula rates the states on the criteria they use to sell themselves, America's Top States for Business shows once and for all whether that confidence is justified.

We score each state on 55 metrics in 10 broad categories of competitiveness. We assign each category a point weighting based on how frequently states cite the category as a selling point in economic development marketing materials. With 2,500 possible points across the 10 categories, only the states that put it all together can make the grade as America's Top States for Business.

Once again this year, states are touting their low Cost of Doing Business above all. In fact, they're touting it more than ever.

The category carries 450 points, more weight than it has ever carried in our study. The increased emphasis on low costs stands to reason. Conservative, anti-tax forces now dominate state governments in much of the country, heightening the competition on the tax front. But there is much more to the Cost of Doing Business than taxes—wages and real estate costs, for example—and we look at a whole range.

"If you're ready to bring your business to a state of higher profits, there's no better place," said the Indiana Economic Development Corp. on its website, which calls the state's tax structure, utility rates and workers' compensation costs "simply icing on the cake." The thing is, nearly every state makes similar claims about its business costs. We subject those claims to objective measures based on publicly available data.

In addition to the increased emphasis on business costs and the purported health of each state's Economy (which carries 375 points this year), states are increasingly talking about their Infrastructure (350 points).

"By rail, by road, by sea or sky, North Carolina's central location on the Eastern Seaboard and excellent transportation infrastructure make it an optimal point for access to markets and customers," crows that state's Commerce Department website.

Even the most perennially competitive states know they cannot rest on their laurels when it comes to infrastructure, and the cost of complacency is dear. Virginia Gov. Bob McDonnell used his state's performance in our 2012 rankings as a rallying point to pass a landmark $6 billion transportation bill.

The three-time winner of America's Top States for Business fell to third place last year, McDonnell said, "in large part because of our repeated inability to properly fund transportation."

"That is unacceptable," McDonnell, a Republican, said in February.

States still like to point to the quality of their Workforce—the Minnesota Department of Employment and Economic Development talks about the state's "tireless work ethic," for example. But with unemployment falling and the pool of available workers shrinking, states are putting less emphasis on that aspect of competitiveness than they have in previous years. The category falls to 300 points for 2013.

States are also putting less emphasis than ever on the quality of their Education systems. The category carries just 150 points in this year's study. We look at all levels of education, from kindergarten through college.

We think our Top States study is the most comprehensive study on competitiveness there is, analyzing thousands of data points. But we know that different businesses have different needs, and every state—no matter the rank—has something unique to offer.

Nonetheless, with millions of you clicking, Tweeting and tuning in every year, we are getting an important conversation started—in the Top States, the bottom states and every state in between.

"Claiming the spot as America's Top State for Business 2012 reinforces the fact that the Lone Star State is the nation's leader in fostering an economic climate that creates jobs, promotes innovation and opens the door to unlimited opportunity," said Gov. Rick Perry, R-Texas, after claiming the top position last year.

The governor of 2012 Bottom State Rhode Island, meanwhile, said that while he would not contend with our findings, he prefers to look at the bigger picture.

"There is a balance between being completely pro-business and having a good quality of life," Lincoln Chafee, an independent, told the Pawtucket Times following last year's rankings.

We want to hear from you as we crunch the numbers on America's Top States for Business 2013. Weigh in with your comments here, and on social media using the tag #TopStates. And stay with CNBC television for regular updates. That's where we'll be counting down this year's Top States. Then, come back here to see where your state stacks up.

By CNBC's Scott Cohn. Follow him on Twitter @ScottCohnCNBC.

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  • CNBC's senior correspondent and lead investigative reporter, Scott Cohn also appears on "NBC Nightly News with Brian Williams," "Today" and on MSNBC.

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