Understanding New Mexico’s poor ranking in “Best States for Business”

At the Rio Grande Foundation we are rarely surprised when New Mexico performs poorly in national ratings of our State’s “free market” policies (or lack thereof) or even “pro-business” policies.

The latest such report to make national headlines is the “CNBC Best States for Business.” New Mexico is ranked a dismal 46th.

Just because a report finds what we already believe (that New Mexico is not a business-friendly destination) doesn’t mean we don’t want to take a closer look at the results. So, here are some thoughts on the methodolgy:

1) The most important variable is “workforce.” New Mexico does not have a well-prepared workforce, but somehow is ranked a respectable 25.

2) Infrastructure is important, but is it really at the very top of the list right behind workforce? Regardless, while New Mexico has decent roads and rail, midwestern states like Illinois which is NOT business friendly will benefit. New Mexico is 39th.

3) Cost of doing business: New Mexico is a generally low-cost place ranking 29th overall. Our business taxes are high and utility costs are rising due in part to MLG’s energy policies like the Energy Transition Act.

4) New Mexico’s economy remains poor. Surprisingly CNBC ranks us 42nd, but with the highest unemployment rate and a weak private sector outside of oil and gas and the federal government New Mexico’s economy is not in great shape.

5) There are several additional variables in the report. Ironically “business friendliness” only garners 8% of the overall points highlighting one of the major issues we have with this report.  On the education variable the big problem is that the report “consider(s) the number of colleges and universities in each state as well as long-term trends in state support for higher education.” Funding is a terrible number to use in any report card when results, especially in K-12, should be paramount.

Overall this is a decent report that gets many things right, but it often glosses over the biggest policy failures in New Mexico and other states while boosting others (especially in the Midwest) that are not business friendly.