Arkansas was the second biggest mover among the best states for attracting new business, jumping 10 spots into 23rd place in Chief Executive magazine’s annual Best & Worst States for Business survey released on Monday.
Chief executives from across the globe again rated Texas as the No. 1 state in which to do business. No. 2-ranked Florida continued to edge up in the qualitative measures. North Carolina, Tennessee and Indiana also made the top five. Ohio, which ranked as the biggest gainer just ahead of Arkansas, rose from No. 22 in 2015 to No. 10 in this year’s survey.
The Best & Worst States for Business survey captures the sentiments of CEOs on a range of important issues. The rankings are crucial, as CEO sentiment drives investments in offices, factories and other facilities that bring jobs to a region.
“This has been a particularly volatile year,” said Marshall Cooper, CEO of Chief Executive magazine and ChiefExecutive.net. “Business leaders are challenged with everything from the growing talent shortage and skills gap to digital transformation to discerning how the presidential election will impact their business.”
This year’s rankings, Cooper said, “show that CEOs support states that understand and offer solutions to those challenges.”
ARKANSAS AMONG BIGGEST GAINERS
In a special section on the biggest movers, Arkansas ranked behind Ohio by leapfrogging over 10 states to move from its 33rd ranking in 2015 into the top 25.
The article highlighted the state’s recent incentive-laden package in late April to lure China’s Sun Paper conglomerate to South Arkansas to invest more than $1 billion to build a bio-products mill that will create 250 new jobs at an average salary of $52,000 a year.
However, the article cautioned CEOs pondering whether to move or expand in one of the “biggest gainer” states like Ohio, Arkansas, Delaware and South Dakota to consider political actions that could affect their business operations, such as the Arkansas General Assembly’s recent approval of a new religious freedom act and a possible referendum on medical marijuana legislation.
In addition to the overall state rankings, Chief Executive’s 2016 Best & Worst States for Business survey also presents individual category rankings, including quality of life, tax policy, workforce quality and best communication of business incentives, as well as rankings by region.
“Business-friendly states work hard to maintain a competitive environment,” said J.P. Donlon, Editor-in-Chief Emeritus of Chief Executive magazine. “Many governors have gotten openly proactive about trying to steal business away from other states, and this new ‘war’ game has every economic development team on alert.”
Overall, Arkansas ranked 25th in taxation and regulation, 31st in workforce quality and came in at the number 24 spot for living environment. The Natural State also received a “check” in the annual survey as a right to work state, which is considered a key issue for chief executives and location experts looking for new factory and project sites.
Regionally, Arkansas ranked 4th overall out of five states in the Southwest region, behind Texas, Arizona and Oklahoma. New Mexico was ranked in the last spot at number five.
The annual survey that is in its 12th year also sought CEOs’ insights on how the need for technical and digital talent and other human capital is making some states more competitive, the top ten states for manufacturing and hi-tech, and provided an overview on the ins and outs of understanding state incentives.
CEOs DISCUSS INCENTIVE DEALS
Many CEOs said the most effective incentive “hooks” are typically built around the jobs and workers themselves, including bounties for reaching certain levels of employment and help with funds and instruction for training workers for certain types of jobs.
The downside of employment-based incentives, of course, is what happens when companies end up not hiring as many workers as specified in the state’s largesse.
“The compliance (requirements) that go along with some of these incentives can be brutal,” noted Sharon Welhouse, practice leader for Ryan’s Credits and Incentives consulting firm in Dallas. “They sound good, but in reality they can’t always be utilized.”
Some CEOs said they steer clear of incentive packages.
They “are actually terrible distractions from business,” argued Don Hicks, CEO of Llamasoft, a supply-chain consulting firm that opened offices in Shanghai, Paris, Cape Town and Sao Paulo but kept its headquarters in Ann Arbor, Mich., because its employees’ roots are there. “State regulators and political incentives are ultimately a con game, and business leaders should stay away from the political gravy train.”
Increasingly, the article noted, technical talent trumps financial incentives as a factor in location decisions.
“Both New York City and California, for instance, perform poorly from a taxation perspective and don’t have incentive programs,” said David Providenti, a partner at Savills Studley real estate advisors. “But companies go there because millennial talent – the best and brightest engineers, programmers and financial talent … want to live there.”
Also, companies have thrown out the historical variables for comparing locations, such as tax climate, and turned it into a war for talent, because the productivity from getting the best and brightest talent exceeds traditional measurement goals for jurisdictions.”