GO
Loading...

If there are Top States, there must be Bottom States

Los Angeles freeway traffic.
George Rose | Getty Images
Los Angeles freeway traffic.

A finish in the Top Five of America's Top States for Business generates plenty of buzz. The states that do well love to cite our rankings. The states that do poorly? Not so much.

But if we are going to have Top States, we have to have Bottom States. They may not want to talk about it, so we will.

Joining the Bottom Five this year is California, which tumbles to 47th place from 40th last year.

California moves into the low ranks largely because it has raised its Cost of Doing Business just as businesses increasingly demand lower costs, and as we give the category more weight in our study.

(Read More: Set It in Stone! South Dakota Is Top State in 2013)

Last fall, California voters approved Proposition 30, which temporarily raises taxes on high earners and increases the state sales tax. The move is supposed to fix the state's disastrous finances once and for all, and, indeed, Gov. Jerry Brown and the state Legislature this year found themselves in the unaccustomed position of deciding what to do with a budget surplus.

But in the process, California solidified its position as America's most expensive state for business, finishing dead last in our Cost of Doing Business category. Not only are taxes high, but so are wages, utilities and rent.

California is nothing if not a land of extremes, however. No state comes close for Access to Capital, where California finishes first. And it finishes second, behind New York, for Technology & Innovation.

(Read More: The Most Improved States in 2013)

Nevada finishes 46th, falling from 45th last year. The Silver State is still mired in the housing crisis, with the highest foreclosure rate in the nation. With the highest unemployment as well, it is no wonder Nevada finishes at the bottom of our Economy category. It also finishes at the bottom for Education, and near the bottom for Quality of Life and Access to Capital. While the economy has begun to rebound from its depths, Gov. Brian Sandoval and the state legislature are hoping to push things along by diversifying the economy and targeting cutting edge technologies. The state recently approved $10 million for the Knowledge Fund, which is supposed to turn technologies developed through the state's research institutions into viable businesses. It is modeled after a similar effort in Utah—a perennial Top State that tied for fifth place this year.

Nothing like aiming high, but Nevada has a long way to go.

State 48 is West Virginia, unchanged from 2012. The Mountain State notches its worst numbers in the Workforce category, where it finishes last. Workers there are the nation's least-educated, population growth is stagnant, and its heavy union presence—West Virginia is a non-right-to-work state—hurts it in the category. West Virginia also comes in last for Business Friendliness. Even in its strongest category, Cost of Doing Business, West Virginia can manage no better than 19th place.

(Read More: Quality of Life Ranked)

Rhode Island, the Ocean State, climbs ever so slightly out of the depths, to No. 49. The state came in 50th last year. A perennial loser in our study, Rhode Island finishes near the bottom this year for Economy, Infrastructure and Business Friendliness. In fact, the state is in the bottom 10 in every category except for Cost of Doing Business, where it comes in 32nd; Quality of Life, at 20th; and Access to Capital, at 23rd.

America's Bottom State for Business turns in a dismal performance across the board—almost.

It has the worst Infrastructure, the highest Cost of Living, minimal Access to Capital and among the highest Cost of Doing Business.

After we ranked the state near the bottom in 2012, an economic development official was quoted as saying, "We always rank at the bottom. It's not something new."

But the Bottom State does have one thing going for it: the nation's Top Quality of Life. And with that, America's Bottom State for Business 2013—Hawaii—gets the last laugh.

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

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

From the Governors

Video