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5 worst states for business in the US

CNBC

With the good comes the bad, and with CNBC's America' Top States for Business comes laggards filling out the bottom of the list. We rank all 50 states, after all, and these are this year's bottom five.

Costs—of living and doing business, as well as business friendliness, are among the categories that set these states back. Just because many hedge fund managers call a state home doesn't mean it's a good place to do business.

5. Connecticut

Connecticut is a wealthy state—ranked third, in fact, for most millionaires per capita in America last year, according to wealth research firm Phoenix Marketing International. But while the Constitution State may be attractive to rich folks, its attraction for business could use some amending. Connecticut comes in 46th in this year's rankings, with the fourth-highest cost of doing business, third-highest cost of living and the nation's second-worst economy; only Alaska's is worse.

4. Alaska

In fact, Alaska is the only state whose economy shrank last year, according to the latest figures from the Commerce Department. In our 2014 study, not only does the Last Frontier have the last-place economy, it is also the fifth-most-expensive state to live in. Alaska had been improving its cost of doing business in recent years, but it slipped in that category in 2014, sliding back into our bottom five to 47th overall.

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3. West Virginia

West Virginia is mired at 48th, its same ranking as last year. The Mountain State finishes last for Business Friendliness, tied for last in Access to Capital, and 48th for Technology and Innovation. Some in the state are recognizing the need to change. A coalition of charities, government and educational institutions has launched "What's Next, West Virginia," aimed, the group says, at "building stronger local economies." But the initiative—and even its website—are barely off the ground.

2. Hawaii

Hawaii finishes 49th overall, which matches the Aloha State's rankings in our Cost of Doing Business, Workforce and Cost of Living categories. But Hawaii does improve on last year's last-place overall ranking. And it still has the best quality of life. Last year's 50th-place ranking prompted some soul-searching in the business community and helped push new initiatives to make the business climate as attractive as the actual climate.

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One potential key: attracting more start-up companies through what the state calls its HI Growth Initiative. In May the state's strategic development corporation announced a $4.5 million commitment from a venture capital fund—Startup Capital Ventures II—to help establish high-technology companies in the state.

1. Rhode Island

This year's Bottom State for Business is Rhode Island. The Ocean State has never finished higher than 48th in our rankings. A high-tax state with some of the steepest utility costs in the country, Rhode Island's fiscal woes are persistent, hindering its ability to improve one of the worst infrastructures in the nation. Rhode Island has the highest unemployment rate in the U.S. and finishes 45th for Business Friendliness.

Rhode Island, too, is trying to improve. Last year its legislature passed more than two dozen bills to reform the business climate, roll back regulations and attract jobs. The reforms are part of a four-year plan, which officials acknowledge was sparked in part by our rankings.

—By CNBC's Scott Cohn

  • Scott Cohn develops in-depth features, special reports and documentaries for CNBC and CNBC.com.

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