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Top States For Business Fine Tunes Ranking System To Reflect Fiscal Crisis

On its website, the Maryland Department of Business & Economic Developmenttouts “A mid-Atlantic location, highly educated workforce and vast resources.”

America's Top States for Business - A CNBC Special Report Preview
America's Top States for Business - A CNBC Special Report Preview

Rhode Island no longer emphasizes its cost advantages as it has in previous years, instead touting itself as “a center of business change” and “a leader in innovation.”

And Idahohas added references to its “natural beauty, abundant farmland and an exceptional array of recreational opportunities.”

The fiscal crisis facing virtually every state is changing the way they market themselves to business, according to the initial phase of CNBC’s fifth annual study of America’s Top States for Business.

The study, which ranks all 50 states using more than 40 metrics in ten broad categories of competitiveness, won’t be complete until this summer. But the changing sales pitch by the states has literally changed the rules of the game—perhaps more than ever before in the five-year history of the study.

Each year, CNBC measures the states by their own standard: the selling points they use to attract business. We separate those pitches into the ten categories, which are then weighted in the study based on how frequently the states use them as selling points.

In 2011, for the first time since we launched the study, states are de-empha-sizing their cost of doing business—including taxes and utility rates. That could be because states are facing pressure to raise taxes or lower business incentives in order to balance their budgets.

States have suffered their steepest decline in tax receipts in the 1930s according to the Center on Budget and Policy Priorities, leaving 45 states with projected budget shortfalls in the next fiscal year. By downplaying their tax climates, states may be choosing not to promise what they can’t deliver.

As a result of the change, the Cost of Doing Business Category will carry 350 points this year—just 14 percent of the 2,500 point total—compared to 450 points or 18 percent last year. The change could impact the typically strong overall ranking of low-cost states like Iowa and Utah.

Rather than crowing about their low costs, states are increasingly accentu-ating the positive aspects of a negative economy—like a plethora of available workers.

Nevada, while still pushing its low taxes and business friendliness, has raised the profile of its workforce, including the fact that it is a right-to-work state. Unemployment in Nevada leads the nation at 14.5 percent.

Also gaining importance in the 2011 study are Quality of Life and Transportation/Infrastructure categories, as states increasingly point to their ideal locations. The latter category swaps places with Economy, which has become slightly less common of a selling point. But recognizing the most pressing issue facing the states this year, CNBC will consider the states’ fiscal health in the Economy category, since budgets can have a direct effect on competitiveness. Here are the new category weightings, and how they compare to last year’s.

Check back here for updates as we continue to tally up our rankings of America’s Top States for Business 2011. We'll announce the winner Tuesday, June 28 on "Closing Bell" at approximately 4:30 p.m. ET. And follow the top-give countdown here and on TV throughout the day.