America's Top States For Business: What We Learned

Our report on America’s Top States for Business began as a conversation back in April between me and CNBC Assistant Managing Editor Steve Lewis. Two very different companies had just announced that they would build new facilities in the same state. How did they both arrive at this one state, we wondered, and why are some states so much better than others at attracting new business? In one of those moments of either inspiration or insanity, “America’s Top States for Business” was born.

While this isn’t the first time someone has tried to rank the states for their business climates, we think that by combining the resources of CNBC and CNBC.com, our study is the most comprehensive. But once we developed our methodology and began plugging in the numbers, it took our journey through the states on some interesting twists and turns.

Surprises Abound

Did you know that New Jersey is the top state for Quality of Life? That one surprised me, even though I work at CNBC’s Global Headquarters in beautiful Englewood Cliffs, and know that New Jersey is much nicer than a lot of people give it credit for. The Garden State won points for world class attractions, quality health care, vast public recreation areas, and a crime rate—per capita—that’s roughly half that of New Mexico! This did give my producer, self-proclaimed “Jersey Girl” Courtney Ford, a brief rush of home state pride—until New Jersey was overtaken in most other areas, and wound up No. 15 overall.

Category Killers

As we were structuring this study, we knew we had to take great care in deciding the level of importance we would attach to each of our ten categories (as Steve Lewis said in one of our early discussions—in a beautifully inadvertent nod to Tom Petty—“The weighting is the hardest part.”) We think we got it right, but the weightings did keep the competition interesting. Examples: Utah overcame a dismal showing at No. 45 in Education (hurt by large class size and low per-pupil spending) to finish at No. 3 overall behind Texas and Virginia. How? Education is one of our most important categories at 250 points, but others, like Cost of Doing Business, Workforce and Economy carry more weight. Utah did well in those, and in lesser categories like Quality of Life—where Utah came in second to New Jersey. Georgia and North Carolina, our No. 4 and No. 5 overall states respectively, had their best showings in the Workforce category.

At 350 points, Workforce is our second heaviest-weighted category, and among the factors we considered was the likelihood of workers in a given state to belong to a union. This particularly hurt Northern states, plunging New York, for example, to dead last in the category. As a native Midwesterner who covered the auto industry for many years, I knew that wouldn’t sit well with some people back home. But I also know that business follows the path of least resistance. Business leaders view unions as resistance, and business is what our study is all about.

First And Last Into The Republic

America’s Top State for Business, Virginia, won its crown through consistency. Like the Old Dominion State itself, Virginia was not a flashy performer in our study, never finishing higher than No. 3 in a single category (Economy). But Virginia also rarely stumbled. Its worst showing was in the Cost of Living category, where the expensive communities in the Northern part of the state dragged Virginia down to No. 35.

And then there’s Delaware. Many of America’s most important companies choose to incorporate there, so we figured The First State would fare well. Delaware did rank No. 1 in Business Friendliness, where we measured the legal and regulatory climates. But Delaware came in No. 40 overall. Why? Delaware is a relatively expensive state in which to do business. With high wage costs and high taxes as a share of income, Delaware tied with Minnesota at No. 31 in the all-important Cost of Doing Business category.

For Hawaii (49) and Alaska (50), it just doesn’t seem fair. They had to compete with the mainland in areas like transportation. But they also suffered in areas that have nothing to do with their location. Hawaii finished No. 44 in Technology and Innovation, and Alaska finished No. 48 in Business Friendliness. Back when we were crunching the numbers and planning to visit the top five states, I couldn’t help but hope that Hawaii would be one of our destinations. Hawaii did come in No. 6 for Quality of Life. But it’s no New Jersey.

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