Virginia rose to No. 3 in the new ranking of “Top States for Business in America” on Thursday, advancing a spot in the annual CNBC survey despite continued uncertainty over the state’s economy and a divisive debate over state incentives for the data center industry.
Ohio ranked No. 1 for the first time in the 20-year history of the cable network competition, which surveys states’ performance in 138 metrics across 10 categories. With infrastructure the primary focus, the survey gave high marks to Ohio for “broad market access, with more than 143 million people living within a day’s drive, low real estate costs, reasonable utility and insurance costs, generous incentives and shovel-ready sites” for economic development.
Virginia was No. 1 in the ranking two years ago, but fell to No. 4 last year because of its economic vulnerability to deep cuts in federal jobs and spending under President Donald Trump. The state’s unemployment rate has risen and participation in the labor force has fallen since Trump took office 18 months ago with plans to shrink the federal government and impose tariffs on U.S. trading partners that fuel shipping through the Port of Virginia.
The economic uncertainty remains — the state dropped from No. 14 to 23rd in the rating of the economy — but Virginia rose in the rankings, while North Carolina, which had finished first a year ago, dropped to No. 2. The two states have dominated the top rankings for the past seven years, with each finishing No. 1 three times. Virginia has won the 20-year-old competition six times, more than any other state.
This year, Virginia benefited from the survey’s focus on infrastructure — from ports and highways to electric power and water supply. The state placed second in infrastructure for the second year in a row, and fifth in education, “but Virginia’s economy has suffered under federal budget cuts, and business costs are growing.”
In contrast, North Carolina had the top economy and third-best workforce, but CNBC noted that “the sharply divided state has struggled to pass a budget” and “those workers have paid the price with a high cost of living and a lack of worker protections, which is bad for quality of life.”
Texas followed Virginia at No. 4, with the nation’s top-ranked work force and second-best economy, but CNBC said “poor health care, high crime and lack of inclusiveness” dropped the state to 49th in quality of life. Minnesota finished No. 5, with high rankings for quality of life and infrastructure, but low marks for the cost of doing business.
This year’s survey rates Virginia’s performance for the past 12 months — half of it under Republican Gov. Glenn Youngkin and half under Democratic Gov. Abigail Spanberger, who said, “Virginia’s rise in the rankings reflects strategic investments that are helping companies succeed in our Commonwealth.”
“Companies the world over know that Virginia has a reputation as a business environment where world-class talent, leading infrastructure, and a collaborative approach to economic and community development give companies the confidence to grow here,” Spanberger said in a statement.
The new governor has made affordability her top priority, and the new CNBC rankings show improvement in Virginia’s cost of living, which moved from 21st last year to 15th this year.
Spanberger struggled with the Democratic-controlled Senate over its proposed repeal of a tax incentive for data centers that put the state’s business reputation at risk, but ultimately prevailed in the three-month budget battle, with the state maintaining the sales and use tax exemption. The 16-year-old exemption has helped Virginia become the global center of the industry, but at the expense of rising public anger over their demand for electricity and water, as well as noise and dominance in the local landscape, especially in Northern Virginia.
Instead of repealing the tax break, the General Assembly agreed to an energy consumption tax on the industry that the governor had suggested earlier this spring to ensure that data centers “pay their fair share” of the tax burden to pay for budget costs that are rising as the federal government shifts more of the expense of Medicaid and food assistance to states.
“I think it was resolved reasonably,” said Larry Sabato, president of the Center for Politics at the University of Virginia. “It’s what Americans used to be good at — it’s called compromise.”
At the same time, the new CNBC rankings reflect political upheaval of Virginia’s higher education system, traditionally one of its greatest strengths in attracting business, after the new Trump administration targeted UVa and other state institutions over their efforts to promote racial and cultural diversity in their student bodies and faculty.
A year ago, Virginia was No. 1 in education in the survey, but that ranking came out just after UVa President Jim Ryan resigned under pressure that he said came from the Trump administration and Youngkin appointees on the board of visitors. Earlier in the year, Virginia Military Institute declined to offer a new contract to Maj. Gen. Cedric Wins, the first Black superintendent in the institute’s history. Gregory Washington, the first Black president at George Mason University, survived multiple investigations by the Trump education and justice departments. (George Mason recently extended Washington’s contract to 2031.)
Instead of an A+ grade, the state received an A- for education in this year’s survey, dropping to 5th. “I’m surprised it wasn’t worse, given what’s happened over the past year or two years,” Sabato said at UVa.
“This has really been a time of crisis in higher education, much of it created by the Trump administration,” he said.
Virginia moved up from 14th to 10th in the CNBC rating of its workforce, receiving a B- grade. The state’s customized workforce program just received a No. 1 rating by Business Facilities magazine for the fourth consecutive year. The state’s unemployment rate has risen to 3.8%, and labor participation has declined, and concern remains over the migration of business talent to other states.
The state received an A- for technology and innovation, moving from eighth to sixth. It ticked up from eighth to seventh in quality of life, graded B+. It received the same grade for access to capital, which remained at No. 10.
Virginia improved slightly in cost of doing business, one of its past weaknesses, moving from 31st to 26th for a C+ mark.
The Virginia Chamber of Commerce said the new survey “reflects the Commonwealth’s many strengths,” but said the ratings on the state economy and cost of doing business “signal that we are losing ground where it matters most: job creation, economic growth, and private-sector dynamism.”
Virginia also dropped from No. 7 to No. 11 in business friendliness, a B grade that may reflect concerns over Democratic control of the governor’s office and both chambers of the General Assembly, which advanced progressive policies on minimum wage, paid family leave and sick leave this year, while maintaining the state’s “right to work” law that prohibits compulsory union membership in union-represented workplaces.
The Jefferson Forum, a conservative policy advocate, attributed Virginia’s slight rise in the ranking this year more to the past than to current policies under Spanberger and the Democratic legislature.
Derrick Max, the forum’s president, warned against the effect of the new data center tax, higher payroll taxes to pay for a paid family leave program adopted this year and other “new labor mandates,” such as raising the minimum wage to $13.75 an hour on Jan. 1 and $15 an hour a year later.
“Virginia’s No. 3 ranking is a credit to the Commonwealth’s inherited strengths, not a blank check for Richmond to tax more, mandate more, and make it harder to do business here,” Max said on Thursday.
Former Secretary of Commerce and Trade Todd Haymore, whose Richmond law firm represents the data center industry, said state policymakers would be wise to consider the warning signs, while celebrating Virginia’s continued place “in the top echelon of states.”
“Virginia can embrace this year’s number three ranking,” said Haymore, an executive at Hunton Andrews Kurth. “However, policymakers and business leaders should recommit to protecting and strengthening the Commonwealth’s competitiveness as we work to reclaim the top spot.”