Top States for Business

America's Top States for Business 2017: Methodology and sources

Key Points
  • Workforce and infrastructure are at the top of the list among 10 major categories and 66 metrics used by CNBC in crowning its Top State for Business 2017.
  • The skills gap across the U.S. labor market is big and getting bigger.
  • As President Trump talks up a $1 trillion infrastructure plan, states are talking more about the strength of their roads, rails, ports and utilities.
CNBC's Top States for Business: Crunching the numbers behind the rankings
CNBC's Top States for Business: Crunching the numbers behind the rankings

Our exclusive study scores all 50 states on 66 metrics across 10 categories of competitiveness. Our study is not an opinion survey; we measure actual performance by the states.

Our aim is to grade the states based on the qualities they deem most important in attracting business. To do that, we assign a weight to each of our 10 categories by analyzing every state's economic development marketing materials. The more the states cite a particular category as a selling point, the more weight that category carries. For example, if more states are talking about their workforce, the Workforce category carries more possible points.

Here are this year's categories and weightings.

Workforce (425 points)

Most states point with great pride to the quality and availability of their workers, as well as government-sponsored programs to train them. We rate states based on the education level of their workforce, the numbers of available employees and the states' demonstrated abilities to retain college-educated workers. We consider each state's concentration of STEM (science, technology, engineering, and math) workers, increasingly in demand by business. We measure workforce productivity based on each state's economic output per job. We look at the relative success of each state's worker training programs in placing their participants in jobs. We also consider union membership and the states' right-to-work laws. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, does not resonate with business.

Infrastructure (400 points)

Access to transportation in all its modes is key to getting your products to market and your people on the move. We measure the vitality of each state's transportation system by the value of goods shipped by air, waterways, roads and rail. We look at the availability of air travel in each state, the quality of the roads and bridges and the time it takes to commute to work. We also consider the condition of each state's drinking water and wastewater systems.

Cost of Doing Business (350 points)

Cost is a major consideration when a company chooses where to do business. We look at the competitiveness of each state's tax climate, as well as state-sponsored incentives that can lower the cost of doing business. Utility costs can add up to a huge expense for business, and they vary widely by state. We also consider the cost of wages, as well as rental costs for office and industrial space.

Economy (300 points)

A solid economy is good for business. So is a diverse economy, with access to the biggest players in a variety of industries. We look at economic growth, job creation, consumer spending, and the health of the residential real estate market. We measure each state's fiscal health by looking at its credit ratings and outlook, as well as its overall budget picture. Because of their own economic impact as well as the ripple effect, we consider the number of major corporations headquartered in each state.

Quality of Life (300 points)

One way to attract qualified workers is to offer them a great place to live. We score the states on livability, as well as additional factors, such as crime rate; inclusiveness, along with antidiscrimination protections; the quality of health care; the level of health insurance coverage and the overall health of the population. We evaluate local attractions, parks and recreation, as well as environmental quality.

Technology & Innovation (225 points)

Succeeding in the new economy — or any economy — takes innovation. Truly competitive states prize innovation, nurture new ideas and have the infrastructure to support them. We evaluate the states on their support for innovation and the number of patents issued to their residents. We also consider federal health, science and agricultural research grants to the states.

Education (200 points)

Education and business go hand in hand. Not only do companies want to draw from an educated pool of workers, they also want to offer their employees a great place to raise a family. Higher-education institutions offer companies a source to recruit new talent, as well as a partner in research and development. We consider the number of higher-education institutions in each state, as well as long-term funding trends for higher education. We look at several measures of K–12 education, including test scores, class size and spending, and we look at technology infrastructure in the schools. We also look at lifelong learning opportunities in each state.

Business Friendliness (150 points)

Regulation and litigation are the bane of business. Sure, some of each is inevitable. But we grade the states on the freedom their legal and regulatory frameworks provide for business.

Access to Capital (100 points)

Companies go where the money is, and capital flows to some states more than others. We look at venture capital investments by state, as well as traditional bank financing for small and mid-sized businesses.

Cost of Living (50 points)

The cost of living helps drive the cost of doing business. From housing to food and energy, wages go further when the cost of living is low. We measure the states based on an index of costs for basic items.

Our Sources

Our rankings are based primarily on publicly available data. Most of the information comes from federal databases. In the cases where government statistics are not available, we seek neutral and/or ideologically diverse data sources. Here is our complete list of sources for 2017:

· ACT, Inc.

· American Lung Association

· American Society of Civil Engineers

· U.S. Bureau of Economic Analysis

· U.S. Bureau of Labor Statistics

· U.S. Census Bureau

· Center for Regional Economic Competitiveness

· U.S. Chamber of Commerce

· The College Board

· CoStar Group

· Council for Community and Economic Research (C2ER)

· U.S. Department of Agriculture

· U.S. Department of Commerce

· U.S. Department of Education

· U.S. Department of Energy

· U.S. Department of Justice

· Education Week Research Center

· EducationSuperHighway

· U.S. Employment and Training Administration

· U.S. Environmental Protection Agency

· Federal Aviation Administration

· Federal Highway Administration

· Federal Housing Finance Agency

· Foundation for Excellence in Education

· Fraser Institute

· George Mason University

· Milken Institute

· Moody's Investors Service

· National Association of State Budget Officers

· National Conference of State Legislatures

· National Education Association

· National Institutes of Health

· National Right to Work Legal Defense Foundation

· National Science Foundation

· National Venture Capital Association

· RealtyTrac

· S&P Dow Jones Indices

· State Higher Education Executive Officers

· Statebook International

· Tax Foundation

· U.S. Patent and Trademark Office

· U.S. Small Business Administration

· U.S. Surface Transportation Board

· United Health Foundation