Up For Grabs: The Best & Worst States For Business 2021

Despite a global pandemic, near-economic collapse, civic unrest, just-plain-insane election cycle and everything in between during this crazy Covid year, when it comes to the places CEOs like to do business, the old saw is true: The more things change, the more they stay the same.

For the 17th year in a row, Texas tops Chief Executive’s Best and Worst States for Business list. Number two? Florida, once again. When it comes to the three criteria CEOs tell us they value most in site selection—tax policy (37 percent rank it first), regulatory climate (35 percent) and talent availability (25 percent)—Texas and Florida outclass all comers. (Find out why, despite the February storm and power collapse, businesses are still flocking to the Lone Star State.)

And once again—yawn—California, New York, Illinois and Massachusetts pile up at the bottom of our rankings (based entirely on polling of the nation’s CEOs) where they have dwelt for most of the list’s existence.

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.

A Tale of Two Besties

Florida certainly got the memo. From high-profile headhunting for high-net worth Wall Streeters to Governor Ron DeSantis’s flaunting of open beaches—and open businesses—throughout the pandemic, the Sunshine State is the clear winner in last year’s economic perception derby. Jonathan Chariff, CEO of South Motors Group, says Florida’s response to the pandemic has been “a tremendous factor,” in his decision to expand there—some $40 million in new BMW and Honda dealerships in Miami. “Florida is blowing up. Except for the extra traffic, it’s great.”

And while Orlando’s tourism economy is just starting to rebound, the city that Mickey built is now a true comer against traditional tech outposts. Major homegrown digital companies such as Luminar, maker of lidar for autonomous vehicles, and Fattmerchant, a competitor to Square in digital payments, “have created a lot of new millionaires in Central Florida,” says Tim Giuliani, head of the Orlando Economic Partnership. The area was pursuing as many new-business leads in the first quarter of 2021 as it had in the comparable period of 2019.

“Sunshine, low taxes, Covid openness: What talent wouldn’t want to move there?” says Kathy Mussio, partner with Atlas Insight development consultants in Washington, D.C. “You can save enough in taxes compared with the Northeast to make a down payment on a house in Florida.”

Brand Texas has had a different kind of year. Despite its No. 1 ranking, the Lone-Star State suffered a serious reputational setback when its electricity grid failed during a February cold snap (see sidebar). While rival Florida broadcasted sun, sand and surf, Texas emitted pure misery, images of frozen residents standing in lines for clean water amid one of the largest public infrastructure collapses in the nation’s history—one critics say was largely predictable and preventable.

CEOs noticed. Texans “are saying this is a blip they can fix,” says Josh Brumberger, CEO of Utilidata, a utility-software outfit based in Providence, Rhode Island. “But they should be leading with, ‘This was a colossal failure, and we own it, and here are the things we’re doing to fix it.’”

The Covid Factor

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.

Rhode Island, which maintained a more open attitude than its neighbors, climbed to No. 37 from No. 40. “We never shut down our manufacturing sector or construction activities, which was rare among the states, because we partnered quickly with industry on safety protocols,” says Stefan Pryor, Rhode Island’s commerce secretary.

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.”

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.

“We’re well-positioned to roar back,” says Bridget Gibbons, economic-development head of the suburban New York City region that is already home to many of the nation’s most storied companies. “Companies with large headquarters are studying whether they want 10 floors in midtown Manhattan or a hybrid model so they can downsize their space—and come to us.” If, of course, Florida doesn’t get them first.

Also: Chicago, Grand Rapids and Columbus are emerging as ideal locations for manufacturers looking to up their digital game. Find out why.