Best & Worst States for Business 2019: Where To Be

The biggest site-selection deals of the past two years—a pair of the largest ever—have blown up in the faces of the CEOs and politicians who consummated them. What follows is likely to be a new era demanding greater accountability by business chiefs and more transparency by government leaders when it comes to expansion agreements that seem too good to be true.

In Amazon’s abandonment of its “HQ2” plans for New York City, an ad hoc tribe of local political activists prevailed over the carefully considered business strategy of one of the world’s dominant companies, headed by the richest person in the universe. And in Wisconsin, voter unrest over generous financial incentives for a Foxconn flat-glass mega-factory helped oust the governor who granted them and wobble the CEO of one of the biggest electronics companies on the globe.

“New York City lost; the entire Northeast lost” in the Amazon debacle, says Dave Salinas, founder and chairman of District New Haven, a tech-startup campus in New Haven, Connecticut. “Imagine the repercussions of having all these citizens cheering for the team that lost.”

View the complete rankings to the 2019 Best & Worst States for Business.

Amazon’s Big Apple disaster had little effect on New York’s standing in the Chief Executive “Best States and Worst States for Business 2019” survey of CEOs because the Empire State already has been stuck at lowly No. 49 for years.

But the fact that Virginia managed to land the other main Amazon HQ2 facility helped boost the state two spots in this year’s rankings, to No. 13, while Amazon’s consolation-prize plan to put a big facility in Nashville assisted a rise of three spots by Tennessee, to No. 4. And the Foxconn unraveling helped drop Wisconsin by four spots, to No. 17, after a strong climb by the Badger State from No. 41 in 2010.

Once again, Texas finished No. 1 overall for 2019, and once again was followed by Florida at No. 2. North Carolina fell to No. 4. Indiana remained No. 5. The ranking of the worst seven states—No. 44 Oregon, No. 45 Massachusetts, No. 46 Connecticut, No. 47 New Jersey, No. 48 Illinois, then New York and California in last place—remained unchanged.

Now CEOs, politicians and the economic development community are absorbing ramifications—and lessons—from the Amazon and Foxconn sagas.

For Rod Robinson, who watched the goings on in New York from afar as CEO of ConnXus, a Cincinnati-based digital-tech company, one obvious lesson is how to manage public expectations. “It’s a matter of making sure voters have an understanding of economic development and how government can play a key role as a catalyst,” he says.

Still, pulling themselves together to compete in the Amazon HQ2 beauty pageant helped unify long-term development efforts in many cities other than New York.

“Amazon did something good by reviewing strengths and weaknesses with every community,” says David Brown, president and CEO of the Greater Omaha Chamber of Commerce, which joined Nebraska in pitching. “And it was a rallying point for us as a local tool to convince people to do some big things in the community that we might not have thought of otherwise.”

Also, Amazon’s commitment to spread the jobs once aimed for New York City to the rest of North America, instead, can be expected to juice development in those 17 locales, including Atlanta. “Amazon already employs more than 4,000 people in Georgia, and they’ve had a good experience here,” says Pat Wilson, commissioner of the Georgia Department of Economic Development.

Meanwhile, Amazon’s nod to Nashville—a promise to locate up to 5,000 jobs there in a new operations center—will accelerate the Music City’s rise. “Nashville has become one of the ‘it’ spots in the whole country right now,” says Kathy Mussio, managing partner of consultancy Atlas Insight.

The Foxconn saga disquieted CEOs, politicians and the economic development community for different reasons than the Amazon arc. The partnership started as a test of how far a state and its leaders could reasonably stretch to guarantee not just a huge investment by a foreign company but also one that, as then-Wisconsin Governor Scott Walker hoped in 2017, would be transformative.

“Wisconn Valley” would arise in the southeastern corner of the state as a complete technology-enterprise ecosystem around a $10 billion Foxconn investment in a factory to build the largest class of flat glass screens for the latest consumer electronics, employing up to 13,000 people directly and tens of thousands more indirectly.

Wisconsin promised a state-record-shattering $4 billion of incentives to Foxconn. But not long after the Foxconn groundbreaking in Wisconsin that involved President Trump in 2018, that ground started shaking instead, as irresistible global industry dynamics began making themselves felt.

Foxconn CEO Terry Gou began sending messages that the company would make smaller screens than planned because it couldn’t be expected to set up the same kind of supply chain in Wisconsin that helps it dominate manufacturing in Asia. Gou also was spooked by the budding trade war between the United States and China because Foxconn makes most of its smartphone screens in China.

Meanwhile, the state’s educational institutions openly fretted about being able to provide enough qualified technical workers for Foxconn. Rumors flew that Foxconn already had decided to import engineers from Asia. Skeptics claimed that Walker hadn’t protected Wisconsin adequately against underperformance by Foxconn. And when it came time to judge Walker’s generosity in the 2018 election, there were not yet any Foxconn workers to show up at the polls. He lost re-election in November.

Foxconn still promises to honor its commitment with some combination of assembly and engineering jobs. “Foxconn still has big plans, and, of course, the scale they’re talking about won’t happen overnight,” says Len Koren, CEO and owner of International Mold and Production, who moved his injection-molding company last year from Grayslake, Illinois, over the border to Kenosha, Wisconsin, to get closer to Foxconn—and after getting $110,000 in income-tax credits over three years to create 25 jobs in the state.

In any event, the Foxconn controversy disturbed some CEOs in the Chief Executive survey because Walker was a Republican who had helped solidify the Upper Midwest for economic investment over his two terms. Now Wisconsin is led by Democrat Governor Tony Evers, a former career school administrator. “There’s concern about how much of a priority economic development will be now,” says Larry Gigerich, head of consultancy Ginovus.
Michigan’s governorship also has flipped to a Democrat after Republican and former Gateway Computer CEO Rick Snyder helmed the state for eight years and led a remarkable turnaround in a once-woeful business climate.

But while Amazon and Foxconn stirred the pot, the impressions of CEOs in the Best States & Worst States for Business survey remained relatively stagnant when it came to their very most favorite, and very least favorite, locations. The rankings once again showed a huge red-state-blue-state political cleft: This year’s top 12 “Best” states are considered Republican red, and the bottom 11 “Worst” states are Democrat blue.

But the results weren’t simply a reflection of the political preferences of the surveyed CEOs. For example, many of the red states are headed by governors who were CEOs, including Florida Governor Rick Scott. In Tennessee, former Governor Bill Haslam, scion of the Pilot Flying J truck-stop empire, has been followed by family-business owner Governor Bill Lee.

“They know what it’s like to put a signature on a check,” says Charles Wood, vice president of economic development for the chamber of commerce in Chattanooga, Tennessee. “They’re business-minded leaders who put business-friendly policies in place.”

Meanwhile, blue states typically are led by career politicians and dominated by public-sector unions and other progressive elements that similarly ensure high corporate and personal taxes and strict regulations that by themselves discourage many CEOs.

For such reasons, while the middle of the rankings were typically fluid, there wasn’t much change at the top and bottom this year. Texas, for instance, just purrs along as No. 1, wearing its pro-business credentials on its sleeve. And California remains at No. 50, all-in with its anti-business identity.

The divergent fates of California and Texas are illustrated in a single development. Toyota is very happy that it yanked its sales and marketing operations from Southern California two years ago and consolidated its nationwide U.S. staff of 4,000 people at a new headquarters in the Dallas area.

“I want to be an employer where people want to come, and in the case of California, the cost of living was eroding the quality of life,” says Jim Lentz, CEO of Toyota Motor North America. “In Texas, the hospitality of the South and the pioneer spirit of the West and the values of the Midwest all blend together to create this very positive climate that results in a great quality of life.”