The latest “best states” rankings won’t prompt any celebratory press releases in Olympia like those that greeted the US News and World report assessment that Washington is the best state in America. Chief Executive magazine slotted Washington well down in the rankings – #46 – in its latest “best and worst states for business”report.
Texas topped the rankings this year, followed by Florida and Tennessee. Ranking below Washington were No. 47 New Jersey, followed by Illinois, New York and California. (Full ranking list here.)
We’ve reported on the Chief Executive rankings annually. Last year, Washington ranked 44th; in 2019, the state ranked 43rd. The best ranking for the state that we’ve reported on was in 2016; that year Washington finished 31st. As you can tell, the trend has not been good. (For that matter, we should mention that based on the factors used by U.S. News, Washington’s best-in-the-nation ranking may already be at risk.
A few thoughts on these things. As we wrote last year,
Washington never does well on this list, which is based on a survey of chief executives. As we’ve written before, we take these things with a whole lot of salt. The Chief Executive rankings are based on an executive survey. Still, perceptions matter.
We also noted then,
This year, take the rankings with more salt than usual. The real test for our state – for every state – will be how well policymakers assist businesses in navigating the recovery.
This year’s Chief Executive comments on the survey underscore that point. Acknowledging the persistence of the states at the top and bottom of the rankings, the magazine writes that the pandemic has raised the stakes.
But while the names at the top and the bottom remain unchanged, what has changed— dramatically—are the stakes. Governors take note: Our survey—of 383 CEOs in March 2021— finds the nation’s business leaders an increasingly restless bunch thanks to Covid. They’re open to all kinds of new ideas about how—and, more to the point—where to do business.
Forty-four percent of those we surveyed report that they’re “more open than before to examining new locations” for their business, while 34 percent said they’re “considering shifting [or] opening significant operations [or] facilities in a new state.” In a world of remote work, reshuffled markets and flat-out rethinking of nearly every aspect of business, the hearts and minds of CEOs are very much up for grabs.
Worth considering is this point.
A few states that prioritized remaining open during the pandemic were able to realize a significant bump in this year’s ranking. South Dakota, where Governor Kristi Noem was defiant about allowing businesses in her state to carry on, jumped 12 spots to No. 12 thanks to national headlines—and praise from business leaders. “We’ve been free to operate as we choose, not just through the pandemic, but long before as well,” says Travas Uthe, CEO of Trav’s Outfitter, a big-box outerwear store in Watertown, South Dakota.
Some expect the bump from strong pro-business leadership during Covid to last. “We won’t know for a couple of years for sure,” says Larry Gigerich, managing director of the Ginovus economic-development consultancy in Fishers, Indiana. “But states that had strong and balanced leadership during Covid will probably be the best positioned for short- and longterm economic growth.”
A lot of factors influenced state responses to the pandemic. On many metrics, Washington did quite well. More important, we suspect, is the magazine’s close.
The virus may finally be easing, but a huge new wildcard in the economic-development game could be how states and cities spend the funds they’ve been promised under the Biden Administration’s $1.9 trillion stimulus package. Port Huron, Michigan, may refund all 2020 property taxes with its $19 million windfall, for instance. Westchester County, New York, plans to use its $187 million to nip and tuck its economic platform via everything from expanding broadband capabilities for remote work to aiding small businesses.
The recently-passed state budget has made investments to improve business conditions; it also raised business costs and imposed a capital gains tax that may discourage business investment and innovation.
Again, we note that business climate rankings are inherently subjective. Chief Executive surveys CEOs. Others evaluate states based on some combination of economic performance, tax and regulatory policies, business costs generally, or surveys of site selection consultants.
While all merit skepticism – there are few absolutes – perceptions matter. And, as Chief Executive reports, the pandemic has increased business mobility and the competition for jobs and invesment has grown more intense.