California is barely a middle-of-the-pack performer when scoring the state’s business climate against the rest of the nation.
California got a below-average No. 30 ranking among the states when my trusty spreadsheet looked at eight yardsticks of economic well-being from a business perspective. That’s not terribly surprising, given all the C-suite criticism of the state’s often pro-consumer leanings.
The nation’s business-friendliest locales, according to this scorecard, are states frequently cheered by executives with large, fast-growing economies: Utah, Florida, North Carolina, Texas and Arizona.
States at the bottom of this scorecard include some of the nation’s smallest economies – Hawaii, Louisiana, Alaska, New Mexico and Rhode Island.
Lessons learned
So, what does the Golden State’s mediocre scores tell us about California’s business climate? Well, ponder its grades – from worst to best – in these eight metrics that built the rankings, stats that are decidedly sympathetic to bosses’ concerns …
Tax Foundation: This taxpayer watchdog group scored California third-worst for business taxation. Only New Jersey and New York ranked lower. After California came Connecticut and Massachusetts.
Corporations pay the least to governments in Wyoming, South Dakota, Alaska, Florida and Montana. Texas ranked 13th best.
US News: The magazine’s annual “best state to live in” rankings contain two monetary slices: the economy and “opportunity.” California ranked fourth-worst when these two business grades were averaged, ahead of Louisiana, New York and Mississippi.
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Idaho scored the best, then Montana, New Hampshire, Utah and Vermont. Golden State rivals Texas and Florida were No. 29 and No. 25, respectively.
Rich States/Poor States: This conservative-leaning economic report ranks states on business climate and economic performance. California’s average rank was ninth-lowest. Worst states by this math were Illinois, Vermont, Maryland, New York and Hawaii.
Tops? Utah, Idaho, Arizona, Texas and North Carolina. Florida was No. 7.
Forbes: When it came to the places where you should start a business, this magazine’s website ranked California No. 37.
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Best spots were North Dakota, Indiana, Arkansas, South Dakota and North Carolina. Worst? Vermont, New York, Washington, New Mexico and Florida. Texas was No. 32.
CNBC: The business news network’s “best state for business” scorecard – it sort of mirrors my scorecard – placed California at No. 23.
No .1 was Virginia, then North Carolina, Texas, Georgia and Florida. Lowest ranked? Hawaii, Mississippi, Alaska, Louisiana and Montana.
GDP: Despite all the hurdles California creates for business, its economic growth remains robust. Over the past five years, California’s economy ranked 13th-best for the expansion of its gross domestic product – the broadest measurement of business output.
The swiftest growth was in Idaho, Florida, Nevada, Tennessee and Arizona. Texas was No. 7. The national laggards were North Dakota, Louisiana, Hawaii, Delaware and Illinois.
WalletHub: This grading of regional economic muscle gave California a No. 5 rank behind only Washington, Utah, Massachusetts and Texas. Florida was No. 7.
The weakest state economies were Mississippi, Hawaii, West Virginia, Arkansas and Louisiana.
Inc 5000: For all the noise about big-name companies departing, California’s economic secret sauce is its entrepreneurs’ knack for creating new ventures.
California ranked No. 1 for the number of firms it has on Inc magazine’s 2024 list of most-successful small companies. Then came Texas, Florida, New York and Virginia.
The states with the fewest among the 5,000 honored firms were Alaska, West Virginia, North Dakota, New Mexico and Montana.
Bottom line
It’s no secret California policymakers don’t see eye-to-eye with corporate interests on many topics.
But Golden State political leaders might note a run-of-the-mill score for something they often brag about – the nation’s largest economy, by numerous measurements.
Remember, heft isn’t always about quality. Plus, historic patterns don’t always repeat themselves.
Yes, nothing is more polarizing than the California’s economic policies. That’s confirmed by a quirky statistical measurement of consistency known as “standard deviation.”
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When applied to each state’s eight individual grades used in my scorecard, this geeky math shows California’s grades had the highest deviation. Next for heavily mixed reviews were North Dakota, South Dakota, Montana and Arkansas. Texas had the 24th-highest deviation and Florida was ninth-highest.
Conversely, the highest statistical agreement was found in three of the top four business climates – North Carolina, Utah and Tennessee.
Politically speaking
Measuring these rankings against the recent presidential election suggests that “pro-business” was a winning argument in 2024.
The states that supported Donald Trump’s victory averaged a No. 21 scorecard rank vs. No. 33 for the states that supported Vice President Kamala Harris (minus the District of Columbia, which was not graded by my scorecard).
Note that the six states that flipped to support Trump vs. the Democrats in 2020 were middle-of-the-pack performers on my scorecard: Michigan (No. 18), Wisconsin (No. 22), Arizona (No. 23), Georgia (No. 24), Pennsylvania (No. 32) and Nevada (No. 38).
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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