By Dale Buss
WASHINGTON, D.C. (Texas Insider Report) — Some day another state may topple Texas from its No. 1 position in Chief Executive Magazine’s annual “Best & Worst States for Business” Ranking – but don’t count on it anytime soon. We asked CEOs where they like — and dislike — doing business, and here's what they said.
Once again, for the 16th year out of the 16 years we have conducted our poll, Texas ranks No. 1 despite the shutdown of much of its oil industry by the CoronaVirus Recession. The state retains extremely business-friendly in its characteristics and policies. The rest of the Top 10 states also remained essentially unchanged from the 2019 rankings.Similarly, the Bottom 10 in the rankings were relatively frozen, with California once again in last place. (See the full list and rankings here.)
More places are pursuing tech jobs by “trying to make their communities an environment that will attract talent,” says Jay Garner, chairman of the Site Selectors Guild. That’s a big reason Austin, Texas, and Nashville, Tennessee, have been shining.
CEOs traditionally prefer “red” states – such as Texas, Georgia & Tennessee – and their business-friendly policies. Many also take a dimming view of, for example, Nevada – where the governorship and legislature flipped into Democrat hands in 2018, and then overrode a 1965 ban on collective bargaining for state employees.
“Nevada’s biggest risk is a quick shift to blue” politics, says Dennis Cuneo, who heads an economic-development consulting firm headquartered in Reno. “It’s a bit scary.”
In Texas, the stunning plunge in oil prices during the pandemic idled 1,000s of oil and gas wells and froze energy-development activity across the Lone Star State. Its millions of white-collar and service-sector jobs also were endangered.
But Texas just keeps shedding potential threats to its position atop the perceptual pinnacle for business leaders.
The nation's CEOs continue to be attracted by the state’s lack of an individual income tax, low business taxes, friendly regulators, reasonable cost of living, and diverse and growing labor force.Add to that a mid-country location and robust recreational options.
Existing employers keep expanding, and new ones keep coming to the Lone Star State – especially from California.
The latest big example? Discount brokerage firm Charles Schwab recently announced its merger with TD Ameritrade – and then announced plans to move its headquarters from San Francisco to Westlake, Texas, just north of the Dallas-Ft. Worth Metroplex.
Rejected in Amazon’s HQ2 search, Houston is plowing right through the disappointment, already having more Fortune 500 headquarters than any other U.S. city but New York, a diversified industrial economy, strong healthcare and academic institutions, and under-appreciated ethnic diversity.
Amazon cited a lack of an “urban core” of tech workers in Houston. So part of the city’s response was to establish "The Ion," a downtown tech incubator that will bring together all Houston’s strands of innovation when it opens next year.
“More and more, talent wants to live close to where they work and not have to get in the car, and they want restaurants and theaters and the rest of their lives close to them,” says Gabriella Rowe, The Ion’s executive director. “And in a sprawling city like Houston, with limited public transportation, that very much means being in the urban core.”
Its historic relationship with the oil and gas sector might have been problematic for Texas’s growth by now, especially amid 2020’s historic swoon in oil prices, but despite the fracking boom, Texas had cut its dependence on the rollercoaster exploration and production part of the business over time.
Downstream aspects that are less cyclical now comprise the biggest part of the oil industry in Texas, such as refining, which is centered on the Gulf Coast.
“While we’re still connected to oil and gas, the relationship isn’t what it used to be, says Karr Ingham (right,) petroleum economist for the Texas Alliance of Energy Producers.Meanwhile, the Texas economy continues to diversify.
For example, Waco — known as the site of the mass deaths of Branch Davidian cult members in 1993 — has become a central-Texas tourism mecca due to the success of reality-TV entrepreneurs Chip and Joanna Gaines, who built a thriving retail and entertainment district there.
Diversification is a big reason business leaders find Texas favorable for M&A activity too.
More than 80% of a group of 200 enterprise leaders said that they’re planning such moves in the next three years in a pre-Covid-19 survey by West Monroe Partners.
“The strong talent and employee base is leading to private equity clients moving and expanding in all the big cities in Texas,” says Adam Gersting, a Monroe Senior Director.
The CoronaVirus pandemic may have cratered some economic development for now, but it hasn’t changed CEOs’ opinions about three important things:
- Texas remains the best place in America to do business, in their eyes;
- Having a capable workforce is still their top concern, despite now-record unemployment; and
- States’ “blue” political leanings concern them — except when they don’t.
