CNBC’s annual “top states for business” rankings are out, and Virginia has moved up a notch, from No. 4 to No. 3.
There’s a lot that can be said for so slight a movement, so let’s say it. Before we do, let’s acknowledge that there may be way too much attention paid to these rankings. However, that’s also why they are important — not because they’re inherently right, but because they do become political talking points. There are other rankings that might technically be more important — the rankings from Site Selection magazine are based on actual corporate decisions. For that matter, actual economic data — from job growth to gross domestic product — are perhaps the ultimate scores. However, CNBC hogs the spotlight, so let’s see what all the fuss is about.
1. This is good news for both Youngkin and Spanberger
Governors always claim credit when the rankings go up and get blamed when they go down. When Virginia’s ranking fell during Glenn Youngkin’s first year as governor, Democrats were quick to blame him — even though most of the data CNBC used was compiled before Youngkin took office. Because much of this data was compiled when Youngkin was still in office, and because Abigail Spanberger is governor now, both get to claim credit here. You can bet that if Virginia’s ranking had fallen, Democrats would have blamed Youngkin and Republicans would have blamed Spanberger. Both of them are probably relieved. “Virginia is doing a lot of things right and we’re looking at places where we can continue to rise,” Spanberger said in a phone interview. “We’re in the top 10 in six different categories and in the top half in every single category except for one, where we’re 26th.” That’s the cost of doing business, where Virginia is up from 31st last year. “By next year, we could be in the top half in every single category,” the governor said. For what it’s worth, she said she speaks “quite regularly” with business prospects.
2. This does not settle the data center debate
There had been concern in some business quarters that the legislative attempt — led by Senate Finance Chair Louise Lucas, D-Portsmouth — to abolish the state’s tax breaks for data centers eight years early would hurt Virginia’s business reputation. There’s no evidence of that here, although these scores may have already been baked in by the time that happened, so we don’t really know.
It’s possible that Virginia’s many data centers may have helped boost the state’s ranking. CNBC’s exact formula (which changes every year) is confidential, but we know generally that “infrastructure” was the heaviest-weighted category and that “large-scale computing power” was one of the things the infrastructure category measured. We also know that Virginia placed second overall in infrastructure, making this the Old Dominion’s best category, which lends credence to the theory that data centers may have helped Virginia stay high in the rankings.
On the other hand, Virginia’s ranking in “business friendliness” fell, from fifth in 2024 to seventh last year to 11th this year. How much of that was due to the debate over data center taxation and whatever signal that sends to other business sectors? We don’t know. All we know is that the “business friendliness” category includes “how hospitable states are toward emerging industries, including artificial intelligence, digital assets and cryptocurrency; prediction markets, quantum computing, and digital health.”
Spanberger believes the immediate resolution of the data center taxation issue — impose a new tax on power consumption but keep the tax incentives — represents “a momentous step while maintaining our status as a trusted party.” We’ll see. We may not have a full picture of the fallout from the data center debate until next year this time.
3. Shovel-ready business sites are a big deal
This is something that Ralph Northam started pushing toward the end of his term, Youngkin ramped up and the new budget that Spanberger just signed continues, although maybe not at the same scale. CNBC makes it clear that these sites are a big factor. Under that heavily weighted “infrastructure” category, CNBC says: “We look at the availability of vacant land and office and industrial space, and we measure state site readiness programs in terms of their overall funding and the number of certified or ‘shovel-ready’ sites.” Since we don’t know exactly what CNBC’s formula says, it’s possible that these “shovel-ready” sites — such as the Southern Virginia Megasite at Berry Hill in Pittsylvania County — counted more than anything dealing with data centers.
We do know that one reason Ohio took first place in infrastructure — and first place overall — is an emphasis on shovel-ready sites. Sometimes these investments aren’t particularly glamorous, but they are key to companies who need to make quick decisions. “Berry Hill is the best example of what it can be when you prepare a site,” Spanberger said. “The more we can see the success of a place like Berry Hill, and how much it has benefited states like Ohio, we can continue to recognize the value.” That site may have been conceived years ago for traditional manufacturing, but it’s become a magnet for technology companies. Youngkin announced that the Microporous battery plant would locate there. Just recently, Stack Infrastructure confirmed it will locate a major data center complex there. Even though Ohio took first in infrastructure, CNBC elsewhere in its report said that “Virginia’s site readiness program is the envy of the nation.”
4. Virginia’s economy score plummeted; federal cutbacks cited
Out of 10 categories, Virginia’s score improved or stayed the same in seven and dropped in three. Two of the three that dropped were lower-weighted categories (“business friendliness” dropped from seventh to 11th while education dropped from first to fifth). However, the biggest drop was in the second most-weighted category: the economy. Virginia dropped there from 14th to 23rd. Why? Here was one of the few places where CNBC offered commentary: “Federal budget and personnel cuts have hurt the Old Dominion’s Economy ranking.”
Spanberger faulted the Trump administration — and it was obviously Trump who has been whacking the federal workforce. “The chaos of tariffs and trade policy and DOGE continues to impact Virginia,” she said.
The Virginia Chamber of Commerce expressed concern about two particular categories dropping, without pointing fingers: “An Economy ranking of No. 23 and Cost of Doing Business ranking of No. 26 signal that we are losing ground where it matters most: job creation, economic growth, and private-sector dynamism,” it said in a statement. “Virginia must remain focused on advancing policies that strengthen our economic growth, the cost of doing business, and overall competitiveness.”
5. Education fell, but we don’t know why
Virginia has been first for three years in a row, first in four of the past six rankings and was second in the only two times we’ve missed the top spot. Virginia has been an educational dynasty in these rankings. This year Virginia inexplicably fell to fifth. I say inexplicably because CNBC offers no explanation, so it’s impossible to know what precipitated this drop. All we know is that this year North Carolina is No. 1, up from No. 6. Spanberger did not have insight into why — the governor’s office got no heads-up on the rankings — but said the drop “just means Virginia needs to endeavor to get ourselves back up to No. 1.”
6. Ohio took the top spot; here’s why
Ohio is the economic success story that nobody is talking about, but might be now. Virginia has always been a contender in these rankings and has won first place more than any other state. Ohio ranked as low as 34th in 2010, but otherwise lingered in the 20s, an unremarkable score in the middle of the pack. In 2019, Ohio rose to No. 10, then fell back and did not enter the top 10 again until 2024. In four years’ time, it’s risen from 15th to 12th to seventh and now first.
Sunbelt states have typically dominated these rankings. This is the first time a Rust Belt state has won, unless you count the year Minnesota took top honors. Even if this is only a symbolic victory, it’s a big symbol. Ohio is back. That’s potentially good news for the parts of Southwest and Southside Virginia whose economies also mirror the Rust Belt.
It’s instructive to see what has powered Ohio’s rise. Ohio has certainly benefited from CNBC changing its formula. In 2010, when the state ranked so low, it was second in transportation, but that category was only the fifth-largest. Now that transportation category is infrastructure and CNBC’s weightiest category. Ohio has also invested heavily in site selection, which appears to be one of the key infrastructure measures. CNBC says Ohio has appropriated $175 million for site development this year. By contrast, Virginia has set aside $30 million for this year. We think that’s a lot, but Ohio is spending almost six times that.
CNBC also notes that Ohio has encouraged the development of data centers and is now a Top 10 state for such facilities. It also points out that data centers have provoked much the same opposition there that we now see here.
Ohio has also greatly improved in the “cost of doing business category,” moving from 39th in 2010 to first this year. Ohio has cut its income tax and adopted a flat tax system, which plays well in the CNBC rankings but has drawn criticism that upper-income earners are the biggest beneficiaries. Some Virginia legislators have looked at doing just the opposite — raising the tax rate for upper-income earners — although those measures haven’t gone anywhere.
States have been called “laboratories of democracy.” They are also laboratories of economics. One value of these rankings, however imperfect they may be, is that they do showcase examples of what’s working and what’s not. Ohio offers an example that in some ways overlaps with Virginia (welcoming data centers, investing in site development) and in some ways contrasts (cutting the income tax). We also need to recognize that some states start with inherent advantages that others don’t. Virginia has the D.C. suburbs with a highly educated workforce, something other states are hard-pressed to duplicate, and the port of Hampton Roads, which other states simply can’t have. Hawaii, which ranks dead last in the CNBC rankings, rates high for quality of life but at the very bottom for cost of doing business — the natural consequence of being a chain of islands thousands of miles from the mainland. It’s hard to see what Hawaii could possibly do to change that.
The point being: There are some scores that states can change through policy and others that they simply can’t.
Virginia is in the position that there are many things we can change to improve our ranking. However, we’re also in a position that there are many things we can do that would lower our place. Politicians who care about these rankings must choose wisely.
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