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The pandemic changed the battle between the states for business and jobs, and the race to be America’s Top State for Business. This year’s runners-up in the annual CNBC study of state competitiveness reflect the strengths of some perennial favorites, but also recent rising states and a first-time top five finisher that excelled in categories that have grown in importance, and evolved.
Published every year since 2007 except for last year during the depths of the pandemic, this year’s Top States study, which took six months to complete, evaluated the states on more metrics than ever before, 85, across ten categories of competitiveness: Cost of Doing Business, Infrastructure; Life, Health and Inclusion (formerly Quality of Life), Workforce, Economy, Business Friendliness, Access to Capital, Technology and Innovation, Education, and Cost of Living.
Here are the 2021 runners-up in CNBC’s Top State for Business in America, and the strengths and weaknesses that determined their scores and overall ranking.
Tennessee makes its first appearance in the top five, propelled by the nation’s second-best economy (after Idaho), and eighth-lowest cost of doing Business. Cost of Doing Business is the heaviest weighted category in 2021, surpassing Workforce, which had been the No. 1 category for years.
Cost of doing business includes evaluation of a state’s business tax climate, wage, utility and real estate costs. This year’s study looked at incentives and tax breaks that states offer to reduce business costs, with special emphasis on incentives targeted toward development in disadvantaged communities.
A fourth-place finish would be good for most states, but not Texas. This year’s finish ties for the worst-ever for the four-time Top State, which last won in 2018.
Texas finishes fourth based on the strength of its workforce and economy. The labor market coming out of the pandemic is tight and states are aggressively touting the quality of their workforces, keeping the importance of this category high in the annual rankings.
But Texas was hurt this year by policies that run counter to the study’s increased focus on inclusiveness. Governor Greg Abbott, a Republican, is pressing ahead with these efforts in a special session that began last week.
This year’s study reimagined the category formerly called Quality of Life as the nation changes the way it views health care and focuses on racial and social justice. The new category, Life, Health and Inclusion, includes traditional quality of life measures like crime rates, health care and environmental quality. But it also looks closely at health-care resources and the states’ progress in ending the pandemic and equity and inclusion.
In addition to the political climate in Texas, the state’s public health system is underfunded, it has the nation’s highest rate of uninsured, and a low Covid-19 vaccination rate.
Utah’s No. 3 finish was earned with the third-best economy in the U.S., which proved to be resilient amid the pandemic in 2020, contracting less than any other state amid the shutdowns, and booming back in the fourth quarter.
As companies emerge from the pandemic, state finances and solid economies are a key factor in site selection and expansion plans. Among the economic factors the annual CNBC study evaluates are economic growth and job growth in the past year, credit ratings and outlook, and the states overall budget picture including spending, revenue and reserves, as well as pension obligations.
Utah’s infrastructure also helped, with the most reliable electrical grid in the nation, but it loses some points for a relatively weak public health system.
North Carolina nabbed its best-ever finish, just barely missing Top State honors by 41 points.
The Tar Heel State scores highly across several key metrics, including Economy and Workforce.
But like Texas, it trails on Life, Health and Inclusion, with no statewide public accommodation law to protect non-disabled residents against discrimination according to the National Conference of State Legislatures.
Tune into CNBC’s “Squawk Box” on Tuesday during the 8 a.m. hour when America’s Top State for Business in 2021 will be revealed and visit America’s Top States for Business for full rankings, scores and state grades.