Small Business Survival Index released

The Small Business & Entrepreneurship Council (SBE Council) has released its twelfth annual rankings of the states according to their public policy climates for small business and entrepreneurship in the Small Business Survival Index 2007.

According to SBE Council chief economist Raymond J. Keating, author of the study, "We're in a period of questions and uncertainty when it comes to the economy. It is critical for elected officials in the states to understand that their policies affect the decisions of entrepreneurs, businesses and investors, the bottom lines of small businesses, and the lives of employees. All of this tallies up to a very big deal for a state's economy."

SBE Council President and CEO Karen Kerrigan added, "The Index helps political leaders and policymakers understand whether their state truly has an environment that is enabling to entrepreneurship and small business growth. Capital and labor are increasingly seeking more friendly terrain, and if a state is losing business and business investment, the Index can help leaders determine how they stack up - both generally and in specific policy cost areas."

The Index has been expanded again this year, and is perhaps the most comprehensive gauge available of how state and local policymakers treat entrepreneurs and small businesses. Covered are taxes, various regulatory costs, government spending, property rights, health care and energy costs, and much more.

The 2007 Index considers 31 major government-imposed or government-related costs affecting small businesses and entrepreneurs. The measures are added together for an overall rating.

Keating explained: "Some elected officials, policymakers and special interests believe that taxes, regulations and other governmental costs can be increased with impunity. Economic reality tells a different story. Ever-mounting burdens placed on entrepreneurs and small businesses by government negatively affect economic opportunity. The Small Business Survival Index tries to make clear the relative governmental burdens placed on entrepreneurship among the states, so that business owners and their employees, elected officials, and citizens in general can better grasp the competitive position of their respective states."

In terms of their policy environments, the most entrepreneur-friendly states under the Small Business Survival Index 2007 are: 1) South Dakota, 2) Nevada, 3) Wyoming, 4) Washington, 5) Florida, 6) Michigan, 7) Texas, 8) South Carolina, 9) Virginia, 10) Alabama, 11) Colorado, 12) Georgia, 13) Tennessee, 14) Indiana, and 15) Arizona. In contrast, the most anti-entrepreneur policy environments are offered by the following: 37) Nebraska, 38) Connecticut, 39) North Carolina, 40) West Virginia, 41) Iowa, 42) Hawaii, 43) Vermont, 44) Massachusetts, 45) Minnesota, 46) New York, 47) Maine, 48) Rhode Island, 49) California, 50) New Jersey and 51) District of Columbia. Complete rankings are found below.

Keating added: "It must be noted that countless issues play into human decision-making regarding business location and investment. But the impact of public policy often is very important. The relative governmental costs among the states will impact where people live and work, that is, where they seek opportunity. That most certainly is illustrated by where people are moving to and from among the states."

As Keating points out, total U.S. population grew by 6.1 percent from 2000 to 2006. With respect to movement to and from the states, he makes these observations:

  • As for the top 25 states in the 2007 Index, population growth over this period registered 8.2 percent, while among the bottom 26 (including the District of Columbia), population growth registered 4.1 percent. Therefore, the population in the top 25 states on the Index grew at double the rate of the bottom 26 on the Index.

  • To narrow matters down, net domestic or internal migration is movement of people between the states, that is, excluding births, deaths, and international migration. It clearly captures people voting with their feet. From 2000 to 2006, the top 25 states on the Small Business Survival Index netted a 3.41 million increase in population at the expense of the bottom 25 states plus the District.

    Finally, it should not be surprising that job growth has come in much faster in the states in the top half versus those in the bottom half on the Small Business Survival Index 2007. From August 2003 to August 2007, for example, job growth registered 8.0 percent in the top 25 states in the Index, compared to 4.7 percent in the bottom 25 and the District of Columbia. That means that the rate of job creation during that period was 70 percent faster in the top 25 states versus the bottom 26.

    You can read the entire report.

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