Texas Named Top State for Business

New rankings say Texas is the best state for business, while Rhode Island is the worst.


They say everything's bigger in Texas, and the Lone Star State may indeed be the best place to grow a business. Texas is the No. 1 state for business, according to CNBC's 2012 rankings of the top states for business.

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Texas is followed by Utah, which jumped up six spots to claim No. 2 this year. The next three spots are claimed by Virginia, North Carolina, and North Dakota, which rose from a No. 13 finish in 2011 to a No. 5 spot this year, boosted by a booming oil industry.

The rankings take into account 43 measures of competitiveness grouped into 10 broad categories. Texas rose to the top in part on the strength of its infrastructure and transportation, a category in which the state was No. 1 in the nation. Texas also ranked No. 2 in technology and innovation, which takes into account factors like the number of patents issued to residents, broadband services, and research grants. The state also is relatively cheap for residents, coming at No. 3 in cost of living.

Utah, meanwhile, claimed No. 2 in part because of its infrastructure and transportation, strong economy, and low cost of living. CNBC reports that Virginia fell from No. 1 in part due to its heavy traffic, as well as its strong ties to the fortunes of a federal government in dire fiscal straits.

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Interestingly, the states that are friendliest to employers may not be the best places for workers by some standards. The No. 47 through 49 states­­—Alaska, West Virginia, and Hawaii—all posted unemployment rates at or below 7 percent in May. And while many states in the top 10 boast low jobless rates, North Carolina's rate was at 9.4 percent in May, well above the national figure, and No. 8 Colorado and No. 9 Georgia had rates that were not significantly different from the national figure. Some of the cheapest states to live in are also some of CNBC's worst for business. Number 36 Kentucky and No. 46 Mississippi are also among the 10 states that rank the best in terms of cost of living.

It's also important to note that union membership works against a state in these rankings. According to CNBC, "While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, doesn't resonate with business."

Texas' preponderance of large corporations bolsters its business-friendly image: the state is home to 52 of the 2012 Fortune 500 companies. However, big business has not yet made the move to Utah: the No. 2 state for business is home to only one Fortune 500 company: chemical manufacturing firm Huntsman.

Snagging the bottom spots are Rhode Island, at No. 50, followed by Hawaii at No. 49 and West Virginia at No. 48. While those states have positive attributes—Rhode Island ranks No. 10 in terms of access to capital, for example, and Hawaii is No. 2 in terms of quality of life—they rate so poorly in other areas that they fall at the bottom of the rankings.

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Even Texas falls near the bottom of the rankings in one area: quality of life, where a high uninsured rate has helped to pull the state down to No. 35 in the nation. However, Gov. Rick Perry frames it as a question of personal choice.

"Do we have a number of our citizens who don't have health insurance? Yes, we do, but that's decisions that the people of the state of Texas have made," he told CNBC on Tuesday.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at dkurtzleben@usnews.com.