In July, CNBC came out with its annual “Top States for Business” rankings, and Virginia slipped from first to third.
Democrats were quick to blame Gov. Glenn Youngkin for the slippage. I dug into the numbers CNBC used to compile the ratings and pointed out that many of them involved data that was compiled before Youngkin took office, including some of the ones to which it assigned the most weight.
Now, Site Selection magazine has come out with its annual rankings for top business climate and Virginia ranks first, up from a tie for 10th place a year ago. Youngkin is naturally eager to claim credit for this; any governor would be. The same question still applies, though: Does he really deserve the credit? The answer lies once again in which data Site Selection used and when that data is from. So let’s dig in.
Site Selection uses 14 criteria, which are all given equal weight. One of the 14 things Site Selection used was those CNBC rankings – so right away we know that some of this is based on what’s essentially pre-Youngkin data. Site Selection assigns Virginia 48 points for its third-place CNBC finish. Had Virginia finished first, we’d have gotten 50. So that may not make too much of a difference – it obviously didn’t stop Virginia from beating out Georgia 608-603. Still we know from the start that there’s some old data here. It may be the most recent data available but for our political purposes here today, it’s old. Let’s move on.
Another category comes from another Site Selection ranking: its State of the State ranking, which is based on what the magazine calls “Rankings That Matter.” Those were published in January, the month that Youngkin took office. Three of the six measures that went into that came out in 2021, two in 2020, and one dates to 2019. Those six measures: the Tax Foundation’s business climate tax index, higher education R&D expenditures as measured by the National Science Foundation, percent improvement in ACT National Career Readiness Certificates earned by working-age adults, Workers’ Compensation Premium Rate state rankings, industrial electric power costs, and fiscal health based on a Pew Center report.
They may indeed be the rankings that matter, and they are certainly the most recent available in those categories, but they were all compiled before Youngkin took office – so if they’re good, he can’t claim the credit and if they’re bad, he can’t be blamed. Virginia picked up 30 points here, although that doesn’t seem very impressive. North Carolina got 50 points, Georgia 47, Texas 46, Louisiana 45 and so on. Virginia comes in between Indiana (31 points) and New York (29 points). This was one of Virginia’s lowest scores and our biggest deficit against our Peach State rival.
If Republicans were inclined, they could claim that Virginia scored first in Site Selection’s rankings despite a low score in this category that was based on policies enacted when Democrats were in charge. If Democrats were inclined, they could claim that Virginia scored first in Site Selection’s rankings based on their policies that laid the groundwork for many of the other numbers (and just ignore the low score in this category). As for me, I’ll just point out an inherent contradiction in those “rankings that matter.” The Tax Foundation business climate rankings rewards states with low taxes; the National Science Foundation higher ed R&D rankings reward states that spend a lot on higher education. Low taxes and more spending? At some point those two things are in contradiction.
Other categories that are listed as using 2022 data also involve a lot of 2021 (and therefore pre-Youngkin) data. One of those is the Cyberstates 2022 tech employment report. That report came out in March and is based on data from 2020 to 2021. Cyberstates shows Virginia ranking fifth in number of technology workers (351,449, with California first at more than 1.4 million) and sixth for tech workers as a percentage of the economy (11.3%, with Washington state first at 22.4%).
Cyberstates has lots of rankings but those are the two that Site Selection uses. Both of those give Virginia a lot of points that Georgia doesn’t have, particularly in the tech workers as a percentage of the economy category. In no other category did Virginia beat Georgia by as many points as in this one. Georgia finished 17 points ahead of Virginia in that “rankings that matter” category, our biggest deficit. Here we made up 11 of them.
It’s fair to say that if it weren’t for the tech workers as a percentage of the economy category, Virginia would not have ranked first. Is any governor responsible for that, though? It’s not as if some governor somewhere along the line issued an executive order decreeing that Virignia would have more technology workers. This is something that has taken shape over time – Republican George Allen was pushing Virginia as the “Silicon Dominion” back when he was governor in the 1990s – and also owes a lot to the state’s proximity to the nation’s capital.
It’s a good thing that Site Selection limited its criteria to just those two data points from Cyberstates, because that report includes others where Virginia doesn’t fare nearly as well. For instance, Site Selection doesn’t rely on “net tech employment added.” Cyberstates says that in 2021, Virginia ranked 34th, increasing its tech employment by just 0.7%, slightly below the national average of 0.9% but obviously below 33 other states. Nevada – where Las Vegas is booming as a tech capital – was first with a 3.3% increase. Even West Virginia showed faster tech growth than Virginia did – 2.1%. I can hear Youngkin right now: He’d say this is evidence that Virginia’s economy isn’t growing fast enough. It does seem a worrisome stat: Virginia may rank high for the number of tech jobs, and their impact on our economy, but we’re apparently not growing that sector very fast – and certainly not as fast as other states. If I were advising Youngkin, I’d tell him not to get hung up on the Site Selection first-place rating. Instead, I’d give him a copy of this Cyberstates report and circle this “net tech employment added” category in bright red ink and tell him this is part of what he ought to be working on – even if it doesn’t count in the Site Selection ratings.
Back to those ratings, though: At least five of the 14 categories the magazine uses are from 2022.
One is a survey of site selection executives who were asked to rank states “in order of attractiveness based on their experience of locating projects in them.” For that, Virginia ranked 11th, good though not the best. Now, to be fair, the things they are subjectively ranking Virginia on may have been things that can be credited to (or blamed on) previous administrations, so Youngkin may have had only limited impact here. Virginia finished eight points behind Georgia here, nine points behind North Carolina, and so on.
Two other 2022 categories are from the Conway Data Projects Database, a global database of corporate expansion projects. There are two scores here – one for total projects, the other a per-capita rating. I like these categories because they’re based on actual numbers, not someone’s impressions. Virginia scored well here, but still slightly behind Georgia. We also know that many projects are a long time in the making, so these scores may not be attributable solely to the governor – but maybe to the work of the Virginia Economic Development Partnership, the state’s economic development agency.
The only categories that can be confined strictly to 2022 deal with the infrastructure bill that Congress passed. That was a bipartisan effort (although more Democrats supported it than Republicans). States were ranked both by number of projects (one score) and by funding (another score). Virginia outscored Georgia both ways. In fact, on funding, Virginia ranked only behind California. This, though, was a federal initiative, not something that the state government had anything to do with. This seems a big talking point for Democrats; all of Virginia’s Republican House members voted against the bill.
Here’s another way to look at these Site Selection ratings: In six of the 14 categories, we finished behind Georgia. In eight, we finished ahead. We started out eight points behind in the executive survey and had a 17-point deficit in the “rankings that matter” category, so at that point Virginia was 25 points behind. Then we clawed our way back to a five-point victory.
The thing to keep in mind with all these rankings: They ultimately depend on the measurements used and the weight assigned to those categories. CNBC had 88 categories, Site Selection 14 (although one of those incorporates the 88 CNBC categories). That’s not to diminish their importance, merely to put them in context.
Here’s maybe the most important context of all: Of the top five states on the Site Selection list, four are in the South (Virginia, Georgia, Texas, North Carolina) and one (Arizona) is in the Southwest. Of the top five states in the CNBC rankings, three were in the South (North Carolina, Virginia, Texas) and two were out West (Washington and Colorado). Taken together, that’s where a lot of the economic development action is these days.
To some extent that’s not new: The Sunbelt (and most of these are Sunbelt states) have been rising for a long time. The so-called Rust Belt, once the nation’s economic heartland, no longer is. The highest-ranking Rust Belt state in the CNBC rankings was Indiana at 14th; in Site Selection it was Ohio at sixth place. This is the new shape of American economic geography. We see this most clearly in the current race for automakers to locate plants related to electric vehicles: They’re mostly going to the Southeast, not the nation’s industrial heartland. (I wrote about this in an earlier column.)
That matters to us in lots of ways, but especially this one: the 3,528-acre Southern Virginia Mega Site in Pittsylvania. Earlier this year, that site finished second to Savannah, Georgia, in the competition for an 8,100-job Hyundai electric vehicle battery factory. Finishing first over Georgia in the Site Selection rankings is a nice thing for Virginia, but finishing second to Georgia for that plant is a real thing. The odds are, though, that sometime Virginia (and that site) will finish first. For one thing, Georgia is already fretting that it’s starting to run out of prepared sites.
The main reason Virginia lost out for Hyundai was that the Georgia site was better prepared – better “speed to market,” as the professionals say. That’s something the Northam administration started to focus on late in its term and something that Youngkin seems especially focused on. The budget he signed included $158 million in state spending on site preparation. When the governor spoke recently in Bristol as part of the Cardinal News Speaker Series, he addressed this: “We’ve got to move faster,” he said. Based on the data above, I don’t think Youngkin can claim that much credit for this No. 1 ranking – just as he can’t be blamed for Virginia falling in the CNBC rankings. But he does deserve the credit for making site development a priority. “Site development is something previous administrations had either ignored on purpose or inadvertently – I’ll give them the benefit of the doubt,” he said. But the bottom line is that other states have been beating Virginia because they have big sites ready and we don’t. “They win because we’re years behind,” he said. To catch up, “we have to run, we can’t walk.” And while the Southern Virginia Mega Site is the big prize, there are others – right now there’s a lot of money flowing out of Washington for reclaiming abandoned mine lines. Politically, this has been a big push by the Biden administration, but Republican-voting localities will be some of the prime beneficiaries.
That No. 1 rating from Site Selection is a good bragging point for whoever the governor happens to be at the moment, and I don’t begrudge Youngkin for crowing about this. As Virginia’s chief salesman, that’s what we need him to do. But the real No. 1 rating comes whenever the governor – be it Youngkin or whoever follows – is able to stand on a site and point to a new employer that has chosen to locate there.