Growing states have enviable ‘problems’

North Carolina is no longer the best state in which to do business. Don’t worry — it’s no big deal.

CNBC is out with its annual ranking, which combines data on land prices, capital, innovation, business costs, workforce, education, and various quality of life indicators. Last year, North Carolina got the #1 ranking. This year Virginia did, with our state falling to #2.

The statistical difference between the two states’ scores in the index was minuscule. The practical difference on the ground between ranking first and second is also minuscule, although there’s no doubting the former is more likely to make fleeting news headlines than the latter.

I’ve written about business-climate rankings many times, so I won’t launch into another detailed discussion here. Here are a couple of things to keep in mind, however.

First, states such as Virginia, North Carolina, Texas, Georgia, and Florida — the top five in this year’s CNBC ranking — really are attracting financial and human capital away from middling or low-ranked states such as New York (22), California (23), Maryland (31), Massachusetts (38), and Louisiana (47). Some of the latter fare worse in policy-focused rankings of tax and regulatory burdens, for example, but still retain some offsetting advantages in natural resources and high-tech enclaves. Although we fiscal conservatives shouldn’t oversell our case, we have the stronger argument about economic growth and development.

Second, the reason North Carolina slipped from first to second this year is a change in methodology, as CNBC itself reported. Its analysts increased the weighting of the infrastructure variable, on which our state ranked 20th, at the expense of the workforce variable, on which North Carolina ranked 3rd.

Why don’t we fare as well in the infrastructure category? The network pointed to a $20 billion backlog in repair and maintenance for our local water and sewer systems, plus concerns about the resiliency of our electrical grid. North Carolina lawmakers have already taken steps to address both of these problems, though more surely needs to be done.

The General Assembly has also boosted spending on roads and bridges, in part by transferring sales-tax revenues associated with motoring (from purchases of car parts, for example) to the Department of Transportation. That measure alone won’t solve the problem of declining gas-tax collections per mile traveled — a consequence of increases in fuel efficiency and electric-vehicle adoption — but it will certainly help.

With regard to traffic congestion, we’re actually better situated than most of our peers. According to the latest INRIX Global Traffic Scorecard, the only North Carolina metro in the top quartile of congested places was Charlotte, and it still ranked much better than the likes of Atlanta, Houston, Miami, and Nashville. Moreover, thanks in part to COVID-era adoption of remote work, the Charlotte area’s congestion in 2023 was still 10% lower than in 2019. Other N.C. metros such as Raleigh, Durham, and Wilmington fell into the middle quartiles, while Rocky Mount, Greenville, Greensboro, Winston-Salem, and High Point ranked among the least-congested places.

The navigation-product firm TomTom produces its own rankings for a select set of communities. Charlotte was again the most congested in North Carolina. But its ranking of 46th out of 80 metros was again much better than most its national peers. Raleigh ranked 68th while Greensboro and Winston-Salem were, by this study, the least-congested metros in the country!

None of which is to suggest we’ve gotten our arms around our state’s transportation needs. We haven’t. Nevertheless, it’s important to remember that most of North Carolina’s challenges aren’t unique. Every state in the union that’s experiencing growth in investment, employment, and population is scrambling to satisfy the demand for infrastructure and other services associated with growth.

As for the states not experiencing strong growth, do you know what their leaders are trying to figure out? How to acquire North Carolina’s problems! If you think governing a fast-growing jurisdiction is a major headache, just try governing a stagnant jurisdiction. It’s the political equivalent of a perpetual migraine.