Texas Named Top US State for Business 2012

The Lone Star State is tops again, displacing Virginia, which doesn’t even finish seconds this year. Last? Rhode Island.
By Scott Cohn | CNBC - Texas has done it again.

The Lone Star State makes a triumphant return as America’s Top State for Business—its third time at the top of our rankings.

“Listen, there is a reason that Caterpillar moved their hydraulics manufacturing and their engine manufacturing to the state of Texas,” said Gov. Rick Perry in November during the CNBC Republican presidential debate.

We can attest to that.

In our sixth annual study, Texas racked up an impressive 1,604 points out of a possible 2,500, with top-10 finishes in six of our 10 categories of competitiveness. Texas has never finished below second place since we began the study in 2007.

Each year, we score all 50 states on the criteria they use to sell themselves. This year’s analysis is the most comprehensive yet, using 51 metrics developed with the help of the National Association of Manufacturers and the Council on Competitiveness, as well as input from the states themselves.

This year’s categories and possible point totals are:

• Cost of Doing Business (350)
• Workforce (350)
• Quality of Life (350)
• Infrastructure & Transportation (325)
• Economy (325)
• Education (225)
• Technology & Innovation (225)
• Business Friendliness (200)
• Access to Capital (100)
• Cost of Living (50)

This year’s study comes amid slowly improving fortunes for the states. A recovering economy coupled with lingering fiscal restraint following the Great Recession are helping states improve their finances for the first time in years.

“Revenue performance remains positive, expenditures in most states are stable and few states have faced mid-year budget shortfalls in fiscal year 2012,” the National Conference of State Legislators reported in May. That means states can resume their focus on the battle for business — and jobs.

In addition to the top spot overall, Texas has the nation’s best Infrastructure, according to our study. It improved to second place for Technology and Innovation, and boasts the third lowest Cost of Living. The state's Workforce improved to seventh best from 14th last year. Access to Capital declined a bit, but Texas still finished in the top 10 (eighth). Perhaps most impressive, the Texas economy recovered from a rare stumble last year, when it finished 14th in the category, improving to fifth this year.

Texas endured a wrenching budget crisis last year. While the state is still not out of the fiscal woods, it managed to emerge with its sterling, triple-A bond rating and stable outlook intact.

The state had to make some sacrifices though, and that hurt in some categories. Texas comes in 26th in Education and 35th in Quality of Life. And while the state held the line on income taxes, the overall tax burden — including property and sales taxes — is high. That hurts Texas in the all-important Cost of Doing Business category, where it comes in 28th.