The more things stay the same, the more they stay the same – at least if you’re the best and worst states in America for doing business. But if you’re somewhere in the middle of the rankings, there are real prospects for changing CEO perceptions, just not always for the better.
According to the CEOs who were surveyed for the 2019 Best States & Worst States for business ranking by Chief Executive, Texas remained No. 1 this year, solidifying its long hold on the top spot. Florida once again was No. 2. Indiana remained No. 5. At least Tennessee leapt up to No. 3 while North Carolina dipped one spot, to No. 4.
But it was at the bottom of the list where things were ossified. The ranking of the worst seven states remained unchanged again for 2019: No. 44 Oregon, No. 45 Massachusetts, No. 46 Connecticut, No. 47 New Jersey, No. 48 Illinois, then New York at No. 49, and California in last place.
The lack of movement at the top and bottom of the list makes sense to Dennis Cuneo, a veteran economic-development consultant. “If you’re not doing business in a state, your impressions are based on what other CEOs say about it, and they keep reinforcing one another,” Cuneo says. “Yet the Chief Executive ranking is the best one out there, because it reflects what decision-makers are saying. And it’s what they think that counts.”
In that regard, the best states can practically do no wrong, with their inherent advantages enhanced by enlightened administrations continually finding ways to be welcoming to CEOs and their economic booty.
Perennial No. 1 Texas is an example. Governor Greg Abbott risks the ire of indigenous football fans by comparing his state’s performance atop economic-development rankings to that of the New England Patriots of the National Football League, just repeatedly winning everything despite everyone else’s best efforts.
“In football or economic development, the one thing that kind of record requires is relentless persistence – the pursuit of what needs to be done to succeed,” Abbott tells Chief Executive.
Also consider Indiana. “It has a very low tax burden and a regulatory environment that is somewhat favorable to business,” notes Dan Starr, CEO of Do it Best, a $3.7-billion home-center-retail supplier in Fort Wayne that is the largest privately-held outfit in the state. “And when you look at the state budget, there is no looming unfunded public-pension liability or something like that.”
On the other hand, California has it real bad, with the state’s ideal climate and digital-tech dominance simply not able to overcome CEOs’ impressions that the Golden State just doesn’t care about how expensive and difficult it is to do business there. So it keeps hogging the bottom of the Chief Executive list.
Similarly, Illinois remained ensconced at No. 48, despite the rise of metro Chicago as a hub for technology jobs. For CEOs, there’s no getting around the fact that the city bears $28 billion in unfunded pension liabilities and billions more in traditional debt. And the state’s new Democrat governor, J.B. Pritzker, has proposed a new progressive income-tax scheme to close the state’s own $3.2-billion budget deficit.
“You cannot tax a society into prosperity, and all Illinois is doing is setting ourselves up to make a bad situation even worse,” says David MacNeil, owner of WeatherTech, a Bolingbroook, Illinois-based manufacturer – who hints that Florida is looking pretty good these days for his future industrial investment.
But from No. 6 through about No. 40, there was considerable movement in best and worst states in 2019. Among the most significant was that by Kansas, which plunged by 10 rungs to No. 29 in the Chief Executive list, the most stunning drop.
Kansas’s fall may be a head-scratcher to some who have regarded it as a business-friendly red state on the rise thanks to a vibrant tech community in metro Kansas City. Kansas sputtered thanks in part to the failure of former Republican Governor Sam Brownback’s tax cuts to spark expected economic growth. And new Democrat Governor Laura Kelly signed off on a long-contested huge increase in school funding; unlike some other states where brief teachers’ strikes broke out in 2018, Kansas teachers chose legislative pressure and the courts as their instruments.
“Though there’s still a strong aerospace component in the economy of Kansas, that’s certainly not what it was before,” says Larry Gigerich, managing director of economic-development consultancy Ginovus. “And with Kansas City sitting on the border, there are certainly a bunch of companies that flip back from one state to the other. Missouri has positioned itself better.” In fact, neighboring Missouri leapt by six slots, to No. 24 on the 2019 list.
Also in contrast to Kansas, Nevada also rose 6 spots in the 2019 rankings, to No. 6 from No. 12. And its growth clearly is coming partly at the expense of places that CEOs don’t regard too well. The tales of two companies illustrate that truth.
Nevada has made some missteps, such as believing in a Chinese company called Faraday Future that was going to build a $1-billion electric-car factory in the state. Its backer faced legal and financial hassles at home and in 2017 simply sacrificed the nearly $216 million in incentives that Nevada had agreed to give Faraday Future. At the same time, Tesla and Panasonic are suspending plans to expand the capacity of their $4.5-billion battery “gigafactory” near Reno in the face of uncertain demand for EVs.
But overall, Nevada remains increasingly attractive to CEOs such as Billy Thompson, who recently moved his startup active-wear company, Thompson Tee, to Las Vegas from California, escaping high costs of doing business and of living there.
“The people we interact with in Nevada just generally seem to be happier,” Thompson tells Chief Executive. “Our theory is that it’s less crowded and has a lower cost of living, meaning people can enjoy middle-class jobs and income here and a quality middle-class life.”
Echoing such sentiments is Elaine Hodgson, who moved the brain trust of her company, Incredible Technologies, to Las Vegas from Vernon Hills, Illinois, several years ago. Illinois “has great pension problems and can’t meet budgets, which is probably stopping many businesses from starting there,” she says. “It’s not considered a business-friendly climate.”
But Nevada, enthuses Hodgson, “is very business-friendly. There are low taxes in general and no income taxes, and low property taxes. It’s a different vibe.”