New State Economic Climate Rankings Released

Massachusetts and Minnesota have the best economic climates in the United States, according to a comprehensive assessment of state economies released yesterday. The two were the only states to earn straight "A" grades this year on the 2006 Development Report Card for the States -- which found they consistently rank among the top states in the vitality of their businesses, the performance of their economies for workers and their positioning for future economic growth.

Connecticut, the only state to receive top grades on the last assessment (released in December 2004), slipped to a "B" on its Development Capacity due to infrastructure concerns and high energy costs. Yet the state maintains its position on the report card's "honor roll," along with Massachusetts, Minnesota, and the states of Colorado, New Jersey, Virginia, and Wisconsin. Each of the states on the honor roll earned an "A" or "B" on each of the Report Card's three indexes.

The yearly assessment, released since 1987 by the nonprofit Corporation for Enterprise Development (CFED), grades each state on how well its economy is doing for its people, how well the economy is doing for the state's businesses, and how well the state is preparing for its future. The report card uses 68 measures in the areas of Performance (e.g., employment, income, quality of life measures), Business Vitality (e.g., business competitiveness, entrepreneurial energy), and Development Capacity (e.g., infrastructure, financial resources, human resources).

"The states with the strongest economies are those that continue to invest in their own resources and people during good times and bad," said CFED President Andrea Levere. "Too often economic development is defined solely as business recruitment. The purpose of the Development Report Card has always been to show that there are a wide variety of areas in which states and businesses can invest in their future."

States that earned a "D" or an "F" in each category include Alaska, Arizona, Mississippi, New Mexico, and West Virginia.

For more information, analysis, and access to grades for each state for the Development Report Card for the States, visit: http://www.cfed.org/go/drc

In addition to the state grades, this year's Report Card includes an essay on the use of tax incentive packages to lure businesses into states. While roughly $60 billion is spent each year by states and localities on such incentives, the essay questions the wisdom of many incentive investments, noting some cases where the cost per job attracted was as high as $8.8 million. The Development Report Card for the States originated in 1987 as a protest against escalating use of tax incentive packages and has emerged over time as a widely regarded index and the most comprehensive assessment available of the health of state economies.

"Economic conditions are continuously changing and states can't afford to stand still," said David Buchholz, research director for CFED. "Each state is different and must react to the opportunities that present themselves. But for long-term growth, the smart money will always be on education, infrastructure, technology, and entrepreneurship."

Now in its 19th edition, the Development Report Card for the States has provided policymakers and businesses a comparative measure to assess each state's business climate. Through this annual assessment, CFED has helped to redefine the elements of a "good business climate." Today, the DRC is recognized as the most comprehensive measurement of the health of each state's economy and serves as a model for dozens of other state and local evaluation tools. Each year, state officials, journalists, and advocates turn to the DRC for a comprehensive evaluation of the economy.