For the past five years CNBC has published a report on the top states for business in America. In every one of these reports the number one ranking has been awarded to either Virginia or Texas. It was Virginia in 2007. It was Texas in 2008. It was Virginia in 2009. It was Texas in 2010. It is Virginia in 2011. They changed the emphasis in 2011 from the previous four reports to de-emphasize the cost of doing business in terms of taxes and utility rates, but it did not matter. Virginia and Texas still beat the other 48 states.
Now in 2011, the Republicans are in power in both states, but the political party is not an explanation for both states doing this well over the last five years. I think there are government structural factors that perhaps the other 48 states and the federal government should take a look at.
Neither of these states have term limits on their legislatures. The people limit their time in office by voting the legislators out of office. Virginia prohibits its governors from succeeding themselves, although former governors are re-eligible after four years out of office. I approve of a term limit on a governor. It may seem too drastic to some, but you can not argue with the results of being a top state for business.
Both Virginia and Texas use biennial budgeting. Biennial budgeting states generally enact separate budgets for two fiscal years at once. Texas even takes it one further step by having biennial sessions of the legislature. This means they only meet every two years. I think this is helpful for business because there is more certainty for a longer period of time, and the special interest groups are not packing into Richmond and Austin every year to persuade the legislators to grant them favors. This also helps the legislators to remember they are not as big and powerful as they might otherwise think they are when special interests aren’t constantly visiting their offices.
Texas Governor Rick Perry offers wise advice that Virginia Governor Bob McDonnell heartily endorses.
The keys to success? Don’t spend all the money. Keep taxes low. Keep regulations fair and predictable. Tort reform to prevent frivolous and junk lawsuits. Fund an accountable education system. Then get out of the way and let entrepreneurs and the private sector do what the private sector does best – create jobs. Since 2005, Texas has created far more private-sector jobs than all other states combined.