Forbes: "Maine Leads List of The Worst States for Business"


Maine ranks No. 50 in Forbes seventh annual Best States for Business.

This story was posted Wednesday in Forbes. See it here.

By Kurt Badenhausen


For the third straight year Maine ranks No. 50 in Forbes seventh annual Best States for Business. Maine’s problems run deep. It has the second highest corporate tax burden at 16% above the national average, according to Moody’s Analytics. Energy costs, like the rest of New England, are also sky high at 27% above the U.S. average. The state is burdened with the oldest population in the U.S. with a media age of 42.

The numbers tell the story on Maine. Its economy contracted 0.6% a year between 2006 and 2011, versus 0.5% annual growth (net of inflation) for the U.S. as a whole. The five-year projected growth rate of 2.5% is fifth worst in the U.S. The job growth picture is equally anemic, as its 1.4% forecasted rate through 2016 ranks fourth worst among states.

Maine has few big businesses headquartered there, including none of the 1,000 largest U.S. companies by sales. The businesses that are located there are not very efficient. Gross state product per employee is a proxy for the productivity of a state and Maine’s $87,000 of economic activity per employee beats only West Virginia and Montana. A bigger issue is that productivity has barely improved the past five years. The 0.2% growth in GSP per employee is the worst in the U.S.

Rhode Island ranks No. 49 this year, down one spot from 2011. Rhode Island has experienced the second worst net migration, after Michigan, over the past five years. Residents are leaving in search of jobs, as the recent unemployment rate of 10.4% is the second highest in the U.S. after Nevada.

Another drawback is a lousy regulatory climate. “Rhode Island has one of the worst records on labor market freedom and health insurance regulations,” says William Ruger, who co-authored the Mercatus Center’s Freedom in the 50 States study, which we incorporated into our state ranking. Rhode Island had the fifth worst regulatory environment in the Mercatus study, which looks at labor regulations, health-insurance coverage mandates, occupational licensing, the tort system, right-to-work laws and more.

Rhode Island took a public beating this year when former Boston Red Sox pitching legend Curt Schilling laid off the 300 Rhode Island employees of his video game company, 38 Studios, and the company filed for bankruptcy. Rhode Island’s economic development agency provided Schilling’s company with a $75 million loan guarantee to entice 38 Studios to move to Rhode Island from Massachusetts two years earlier. The loan was made with the idea of Rhode Island reaping jobs and tax income from the move. The economic development agency sued Schilling and several of its former members last month, but it is not expected to recoup much of the loan.

Our states ranking is based on six factors: business costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. The study incorporates 35 data points with business costs weighted the most heavily. Moody’s Analytics provided much of the economic data. A common theme runs through the bottom 10 states as No. 46 Mississippi is the only one that is a right-to-work state (click here for a detailed methodology).

California cracks our bottom 10 at No. 41. California’s $2 trillion economy is bigger than all but eight countries around the globe. The state represents 13% of the U.S. economy. Yet, some companies have given up on the Golden State.Comcast shut down its Northern California call centers this year, which cost 1,000 people their jobs. The company cited, “the high cost of doing business in California.” Campbell Soup is shutting down its Sacramento factory—eliminating 700 jobs—and moving production to Texas, Ohio and North Carolina. Forbes’ top ranked state Utah, has nabbed recent expansions by California companies, including Adobe Systems, Ebay and Electronic Arts.

California is littered with problems. It ranks last in Pollina Corporate Real Estate’s study of the states with the best financial incentive programs and state economic development efforts. Its A1 bond rating from Moody’s on general obligation debt is the second lowest of any state—only Illinois is worse. The regulatory environment is fourth worst per the Mercatus report. The recent unemployment rate of 10.1% is the third highest in the nation. In addition to a heavy tax burden, energy costs are 33% above the national average.

Yet for all of its issues, the outlook is relatively bright in California. The economy is projected to expand 3.6% annually over the next five years—ninth best among states. Forecasted job growth of 2% ranks in the top third. While many companies and individuals flee California, others are drawn in by the concentration of highly educated workers and by the fact that California is home to 10% of the 1,000 largest U.S. public and private companies. Another plus is the $36 billion in venture capital money invested in California companies the past three years, which is four times the total of any other state. And of course, there is always the weather.

Governor LePage Issues Statement on Forbes’ Ranking of Maine as ‘Worst State for Business’ 

AUGUSTA – Governor Paul R. LePage reacted to today’s release by Forbes of its annual ranking of Best States for Business. For the third year in a row, Maine ranked in last place, making it the Worst State for Business, according to Forbes.

“I am disappointed, but not surprised,” said Governor LePage. “We will continue to be on the bottom of the barrel until we make structural changes. During the past two years, I have advocated over and over again for changes that will improve Maine’s economy. We’ve got to get serious about lowering energy costs, improving education and paying our bills. These are the areas we need to focus on to better the lives and opportunities of all Mainers.”

Despite Maine’s ranking as 50 overall, the state showed improvement in lowering business cost, rising from 44th in 2011 to 40th in 2012.

The article cited specific challenges facing the state, including having the highest corporate tax burden—16 percent above the national average, energy costs 27 percent higher than the national average, and the oldest population in the United States.

“Without enacting bold changes, if Puerto Rico becomes a state, next year Maine’s ranking will drop to 51st ,” the Governor quipped, referring to Puerto Rico’s recent resolution in favor of statehood.

About Steve Robinson

Steve Robinson is the former editor of The Maine Wire and currently the executive producer of the Kirk Minihane Show. Follow him on Twitter @BigSteve207.

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