SalemNews.com, Salem, MA

July 11, 2012

Mass. falls in ranking of business-friendly states

MATT MURPHY and ANDY METZGER
State House News Service

BOSTON — Massachusetts tumbled to the middle of pack in CNBC's latest ranking of best states for business, falling from sixth to 28th in the survey published on Tuesday marking the "biggest decline" of any of the 50 contenders, according to the cable news station.

Top honors this year went to Texas, a state about as different as one could get from Massachusetts in terms of ideology, geography and climate, but also one that competes with the Bay State for some of the same companies.

Gov. Deval Patrick has frequently cited the state's relatively high ranking in the CNBC survey as proof of positive business conditions here, but on Tuesday the governor's office chose to focus on those economic indicators telling a more positive story.

"Over the last several years, Massachusetts has cut corporate taxes and burdensome regulations, reduced health care and energy costs and continued record investments in education, innovation and infrastructure. Our growth strategy consistently gets results - we've seen sixth straight months of job growth and our unemployment rate is well below the nation's as well as many of the states listed in CNBC's top ten," read a statement from the governor's office.

"These rankings confirmed our strengths in access to capital, education and technology and innovation. We will build off of them and continue to advance our proven growth strategy until the Commonwealth's economic recovery is complete," the statement continued.

Massachusetts ranked 49th in cost of doing business, down from 41st, which was one reason for the drop, according to CNBC. Other factors included a lagging economy, which went from 15th to 21st, and infrastructure, which reflected the state's biggest decline from 29th to 45th.

"Still a top state for Education (3) and a magnet for capital (tied with California for No. 1 in Access to Capital), the Massachusetts economy nonetheless faltered," the CNBC report on the rankings stated.

House Minority Leader Brad Jones blasted Patrick's leadership in a statement following the release of the survey, predicting that the governor would try to challenge the validity of the findings. He also called attention to Republican-sponsored jobs legislation filed earlier this year, some of which has found its way into other bills.

"As if the news couldn't get any worse for Massachusetts residents, CNBC ranks the Commonwealth 49th in cost of business, ahead of only Hawaii. These latest numbers are egregious. The residents of Massachusetts deserve better…," Jones said. "We can no longer afford to accept excuses from Governor Patrick when it comes to jobs and job creation. Massachusetts needs jobs now."

Secretary of Housing and Economic Development Greg Bialecki did, in fact, question whether CNBC had changed its methodology for evaluating states, suggesting it might be one of the only reasons Massachusetts could fall so far in its grade for transportation and infrastructure.

"You could imagine, maybe, how business friendliness might change from one year to the next, but our infrastructure doesn't change that much from year to year," Bialecki said. He added that if CNBC started looking at and had concerns with the state's long-term infrastructure plans that would be consistent with Gov. Patrick's message that the state needs a long-term financing solution for the state's infrastructure needs.

Despite the year-to-year drop in the business channel's ratings, the Massachusetts unemployment rate stood at 6 percent May, two points lower than the 8.2 percent national rate. The state's unemployment rate fell by more than a point over the past year, and is also below the 6.9 unemployment rate in Texas for May 2012.

Massachusetts also ranked higher than every other New England state, with the exception of New Hampshire, where high energy and health care costs can often be a deterrent to business expansion. Rhode Island ranked 50th in the 2012 survey.

However Senate Minority Leader Bruce Tarr (R-Gloucester) said CNBC's evaluation showed the state still has some ways to go.

"If someone evaluates us and finds areas that we can improve we should pay attention to those," Tarr said, adding, "Evaluations like this are the reasons that we persist in putting issues on the table to grow the economy and create jobs."

Bialecki said that despite ranking 41st in cost of living, the state placed 11th in quality of life, arguing that wages have remained strong in Massachusetts offsetting some of the higher living costs in the Northeast.

The secretary said he could not explain why the economic ranking fell, but said he was concerned that the survey would reinforce the "perception" that Massachusetts is a difficult place to do business.

"I don't know that there's anything in particular that one can point to that triggering that. We have really tried to hold the line on business taxation and regulation and there haven't been any major new laws of regulation that negatively affected the business climate in the last year," Bialecki said, adding that state officials need to do a better jobs at selling different regions of the state where business costs, such as rent, might be lower than the Greater Boston market.

The CNBC survey, in recent years, has served as a controversial benchmark for state leaders, and became a focal point of several exchanges between Gov. Patrick and his 2010 Republican gubernatorial rival Charles Baker. As Patrick proudly boasted of Massachusetts' cracking the top five state in 2010, Baker countered that Massachusetts ranked 40th in cost of doing business.

Over the past three years, Massachusetts has hovered near the top of the rankings, climbing from eighth to fifth in 2010 before dropping back down to sixth in 2011. When the state broke the top five in 2010, CNBC noted that it was a first for a state in the Northeast.

"CNBC's rankings today further confirm what we have already been seeing all across this Commonwealth - that Massachusetts is indeed on the mend and on the move, and that we are coming out of this recession faster and stronger than other states," Patrick said at the time.

The disappointing results for Patrick administration officials on Tuesday came as anticipation was rising that Massachusetts might top the list as the countdown moved closer to number one and Massachusetts had not been named.

The cable station was tracking Twitter interest, and Massachusetts jumped to the third position right before Texas was announced the top state as everyone from press aides to Gov. Patrick and Lt. Gov. Tim Murray tried to generate enthusiasm for the state's chances.

Utah, Virginia, North Carolina and North Dakota rounded out the Top 5.

Earlier this year, Texas Gov. Rick Perry addressed attendees at the BIO International Convention in Boston, touting an announcement by Apple that it would create 3,600 jobs in Texas and describing how Boeing chose to move its headquarters to Texas.

"I can assure you that all of my governor compatriots in the country have Texas in their sights. But that's a good thing. We love competition," Perry told the assembled scientists at the Boston Convention and Exhibition Center.

On television, Perry affirmed his hands-off, conservative style of government and defended the state's large number of people who do not receive health insurance.

"Texas decided a long time ago that we weren't going to burden people and force them into insurance," said Perry. That's a stark contrast to Massachusetts, which has the highest number of insured people, in part because of the 2006 law that required all resident to purchase insurance or pay a fine on their taxes.

Texas' biggest strength, according to CNBC, is infrastructure and transportation, where it ranked first. Massachusetts' biggest strength was access to capital, where it ranked first, technology and innovation (7) and education (3).