Virginia is America’s Top State for Business in a record-setting year

With the nation’s best education system and policies that give companies room — both literally and figuratively — to grow, Virginia is America’s Top State for Business in 2024.

This is the Old Dominion’s sixth time at the top of CNBC’s rankings, and its third win in five years — a record unmatched by any other state since the study began in 2007. In a rare feat this year, Virginia finishes in the top half or better in each of the study’s 10 categories.

In a year when infrastructure is all-important with billions of federal dollars to build new facilities, Virginia delivers the third-best infrastructure in the country, according to the CNBC study.

With 121 million people within a day’s drive, Virginia is one of America’s most accessible states. It is also one of the most accessible virtually. An estimated 70% of global internet traffic flows through Northern Virginia, with its huge concentration of data centers. While this is putting a strain on the power grid — one of the few weak spots in Virginia’s infrastructure due to reliability issues — Virginia residents and businesses can easily tap into all that internet traffic with excellent broadband connectivity.

“We needed to get on the power challenge. Virginia’s power needs are growing faster than the nation,” Gov. Glenn Youngkin told CNBC in a “Squawk Box” interview on Thursday morning. He cited an announcement made this week with Virginia-based Dominion Energy for plans to build the first small modular nuclear reactor in the U.S.

But where Virginia’s infrastructure really shines is in the wealth of shovel-ready sites the state offers for companies that want to build fast. The state’s economic development arm has certified dozens of sites across the Commonwealth, promising that all utilities and infrastructure can be in place within 18 months.

“Virginia works really hard to listen to companies, and companies are telling us that they need these ready sites,” said Michael Dreiling, vice president of real estate solutions for the Virginia Economic Development Partnership.

The Site Selectors Guild, which gathered some of the data on site readiness for the CNBC study, said Virginia’s program is one of the most advanced and well funded of its kind in the nation.

“Those states that have had a focus on site readiness and infrastructure upgrades have really had a lot of success over the last two or three years,” said Chairman Seth Martindale.

Virginia’s education advantage

Virginia’s biggest competitive strength is its education system, ranked No. 1 in the nation in the CNBC study.

Virginia offers a wealth of higher education opportunities, including five historically Black colleges. State support for higher education has increased a healthy 28% over the past five years, according to data from the State Higher Education Executive Officers Association.

At the K-12 level, Virginia offers some of the most individualized K-12 instruction in the nation, with an average of 10.9 students per teacher last year, according to the National Education Association. That appears to be translating to solid test scores.

“We reestablished expectations of excellence with intensive tutoring, adopting the science of reading, launching lab schools and renewing the focus on career and technical education,” Youngkin said in his State of the Commonwealth address in January.

Youngkin, a Republican, famously rode the education issue to an election victory in 2021. But Virginia’s education successes are more nuanced — and bipartisan — than that might suggest.

After Democrats took control of the Virginia General Assembly last November, they pushed back on what they said were cuts in education funding in Youngkin’s budget. Ultimately, the two sides reached a compromise that includes $2.5 billion in new funding for K-12 schools, and 3% pay raises for teachers and state workers.

Divided government pays dividends in Virginia

The education compromise is one of many ways that a divided government has helped to moderate Virginia politics.

Another involves taxes. Youngkin and the Democrats reached a stalemate in budget talks earlier this year, ultimately approving a plan that neither raises nor lowers taxes. High business costs are Virginia’s biggest weakness in the CNBC study. Holding the line on taxes helped keep Virginia in the upper half of that category — just barely — with the 24th lowest business costs in the nation.

“The fact is that results matter, and when I came into office, Virginia was bottom-third in job growth and many companies were telling me they were ready to move away,” Youngkin said in his CNBC interview. He was sworn in as governor in January 2022.

He noted that $74 billion in capital has been committed to Virginia since then, and also cited $5 billion in tax relief since he assumed office, substantial investments in site readiness, and streamlined regulations and red tape among the factors that have boosted the state’s business profile. “To get an air or water permit in Virginia takes you one-third of the time it did two-and-a-half years ago,” he said.

Democrats also stood in the way of Youngkin’s effort to institute a 15-week abortion ban. Opponents argued that among other things, the ban would have hurt the state’s ability to attract younger workers to the state.

Youngkin has argued that the state needs to do more to attract talent. The state’s otherwise stellar workforce falls to ninth place in this year’s CNBC rankings, in large part because not enough educated workers are moving to the state.

“Virginia has a population migration problem. The data is irrefutable,” Youngkin said in January. “For 10 years now, more people moved away, rather than to Virginia, from the other 49 states.”

He told CNBC that Virginia is making progress in reversing the trend of people moving away from the state, with the workforce growing at what he described as a “rapid pace” – 240,00 more people working in the state since he took office, a talent boost that he said has helped him in the battle to keep business taxes from going up, with more tax receipts coming from the workforce. He also cited efforts (retirement reform among them) to keep both active-duty military and retired military in the state, over 850,000 residents in all, whom the governor said he has prioritized as part of workforce retention.

“We are seeing real changes in that trend,” he said. “Businesses choose every day, ‘Where am I going to invest and grow?’ and they are choosing Virginia now more often than not.”

Virginia’s “gridlock-is-good” formula does not always work, however. Youngkin’s plan to lure the National Basketball Association’s Washington Wizards and the National Hockey League’s Washington Capitals away from the District of Columbia by establishing a new sports and entertainment district in Alexandria collapsed in a wave of Virginia politics and concerns about the cost.

Monumental Sports & Entertainment owner Ted Leonsis said in March that he would keep the teams in D.C. after all, and he took a jab across the Potomac.

“It is easier and better to do business in Washington, D.C., than it is to do in Virginia,” he said.

Since the District is not a state, it is not included in the CNBC rankings.

“It was a real disappointment that the Capitals and Wizards ended up not coming to Virginia, but the reality is that stadium deals are hard, and we put together possibly the best stadium deal ever and still weren’t able to get it done through the General Assembly. We don’t win ’em all,” Youngkin told CNBC.

Scoring all 50 states

The CNBC study measures all 50 states across 10 categories of competitiveness, for a total of 2,500 possible points. Virginia scores 1,595 points to capture this year’s crown.

Our methodology assigns a weight to each category based on how frequently states cite it as a selling point. The idea is to measure the states based on the criteria they use to pitch themselves to business.

Here are this year’s categories and point totals:

• Infrastructure: 425 points (17%)
• Workforce: 375 points (15%)
• Economy: 350 points (14%)
• Quality of Life: 325 points (13%)
• Cost of Doing Business: 275 points (11%)
• Technology & Innovation: 250 points (10%)
• Business Friendliness: 250 points (10%)
• Education: 125 points (5%)
• Access to Capital: 75 points (3%)
• Cost of Living: 50 points (2%)

The rest of the Top States

The 2024 CNBC rankings produced the tightest finish in Top States history. Just three points separate Virginia from this year’s runner-up, North Carolina. The Tar Heel State, which finished at the top of the rankings in 2022 and 2023, had hoped to pull off an unprecedented three-peat. Its performance in 2024 was strong, but North Carolina fell to No. 20 in Infrastructure, this year’s heaviest-weighted category.

The state’s utilities were a major culprit, possibly because of its rapid growth. North Carolina water utilities face more than $20 billion in repair and maintenance needs over the next 20 years, according to the U.S. Environmental Protection Agency. Electricity customers are dealing with nearly eight hours without power per year, according to the most recent data from the U.S. Energy Information Administration.

In third place is Texas, which had dropped out of the top five for the first time in 2023. With educated workers continuing to pour into the state, Texas boasts the best workforce in the nation, according to our study. But Texas also has power grid issues, and no site readiness program, dropping it to No. 26 for Infrastructure. With poor health care, weak worker protections and the nation’s strictest abortion ban, Texas finishes last for Quality of Life.

Georgia comes in at No. 4 — the same as last year — on the strength of its superior infrastructure, which includes the world’s busiest airport. But the Peach State finishes 40th for Quality of Life.

Rounding out the top five is Florida, with its best finish ever in our rankings. Florida’s economy ranks best in the nation for the second year in a row. Economic growth and job growth are solid, and the housing market has performed well, although an uptick in foreclosures and high insurance premiums are causes for concern. But Florida’s infrastructure falters because of the state’s extreme climate risk. The power grid is the nation’s least reliable. It is also fueling an insurance crisis that drops the state to No. 42 for Cost of Living.

This year’s Most Improved State is Alabama, which surges 22 places to No. 20 overall. A big increase in net migration and better performance of worker training programs led to a big jump in its Workforce ranking, moving into a three-place tie for 24th place, up from No. 44 last year. The Yellowhammer State also has an outstanding site readiness program. That new metric helped Alabama move up five spots in Infrastructure to No. 8.

America’s worst states for business

We rank all 50 states, so if there are Top States, there must also be Bottom States.

State No. 46 is Montana. Big Sky Country is lacking space on the ground for development. That hurts the state’s Infrastructure ranking.

Louisiana, at No. 47, has one of America’s least-educated workforces. A troubled housing market hurts the state’s Economy ranking.

Alaska, at No. 48, has America’s worst infrastructure. Despite its massive area, the state has little space for development. It also has the nation’s worst broadband service.

Mississippi finishes at No. 49 due to a stagnant economy — the worst in the nation — dragged down by the nation’s lowest worker participation rate.

America’s Bottom State for Business in 2024 is Hawaii, dragged down by its off-the-charts costs, including child care, and rising climate risks.

The Aloha State has endured devastating shocks in recent years, both in human and economic terms. The Covid-19 pandemic devastated the state’s all-important tourism industry in 2020. Then, just as the state was starting to come back, the horrific Maui wildfires last August dealt the second half of Mother Nature’s awful one-two punch. State forecasters predict tourism will be flat this year, both in terms of the number of visitors and the money they spend. But that means Hawaii has all kinds of room to bounce back in 2025 and beyond.

Didn’t see your state mentioned? You can see where it finished overall, and in all 10 categories of competitiveness, in the full America’s Top States for Business rankings.

As always, CNBC welcomes your feedback. On social media, use the hashtag #TopStates.