HONOLULU - Photo courtesy of HTA
HONOLULU – Photo courtesy of HTA

BY MALIA ZIMMERMAN – HONOLULU — Hawaii has the worst business ranking of all 50 states, according to an analysis by the Chicago-based watchdog group Truth in Accounting.

Truth in Accounting, incorporating six separate state rankings, provided the study exclusively to Hawaii Reporter.

Hawaii’s average rank across the six studies was 45.5, edging California’s 45.2 for the worst. Connecticut was third-worst with an average of 43.8, the analysis showed.

That compares with the top three states — Utah (4.7), North Dakota (7.3), and Virginia (7.5).

It incorporates six state rankings: Truth in Accounting Taxpayer Burden — calculated from the state governments’ total assets and liabilities — Forbes Best State for BusinessCNBC Top State for BusinessChief Executive Magazine Best and Worst State SurveySmall Business and Entrepreneurship Council’s Business Policy IndexAmerican Legislative Exchange Council’s Rich State, Poor State Study.

“These rankings used a variety of methodologies to rank the states,” said Jeff Wysong, a research analyst with Truth in Accounting. “Some used a diverse set of variables (Forbes and CNBC); others used a focused set of variables deemed crucial to business success (ALEC and SBEC); TIA analyzed state finances; and one was a pure opinion survey of leading businessmen (Chief Executive magazine). Therefore, these rankings all provide different views on the state in comparison to other states.”

Specifically, Hawaii ranked as follows: 48 (TIA), 49 (CNBC), 48 (Forbes), 43 (Chief Executive Magazine), 40 (ALEC), and 45 (Small Business and Entrepreneurship Council).

“Looking at the state from various perspectives leads to similar conclusions about the state’s economic health. In short, everyone agrees on Hawaii’s relative rank.”

The results don’t surprise most business owners and managers here – even the most successful of them.

Former Gov. Ben Cayetano and his wife Vicky

Former First Lady Vicky Cayetano, who runs United Laundry Services Inc., said  Thursday in a speech to Smart Business Hawaiimembers that “vision, luck, timing, and personal relationships” helped the business she co-founded 25 years ago grow into the successful company of today.

United Laundry Services has expanded from 25 to 550 employees, grosses $45 million a year, has operations on Hawaii Island as well as Oahu and includes as clients most Waikiki hotels, Oahu hospitals and nursing homes.

Cayetano said that while her company has been lucky and has benefited from good timing, she has watched many smart and talented people go out of business because of Hawaii’s challenging business climate.

Hawaii also has ranked as the most expensive place in the country to do business, a major hurdle, Cayetano noted.

Hawaii also has the highest electricity rates in the nation. Cayetano pointed to utilities, including electricity, as her second largest expense behind labor.

The quality of the labor force, regulations and high state taxes are barriers to operating a profitable business, Cayetano said.

Cayetano, the wife of former Democratic Gov. Ben Cayetano, said lawmakers deserve blame for the conditions in which businesses must operate.

Jack Schneider, JS Services CEO

“I find that a lot of times there is a disconnect — I tell my husband this — that the people who make the laws don’t know how to run a business, so they come up with a law that you cannot implement,” Cayetano said.

While the intent of the law might be good, its various drafts can convolute the original intent, Cayetano said.

Jack Schneider, founder and chief executive officer of the employee leasing company JS Services, said the price of doing business, including high rental rates for office space, is palpable.

Schneider, a director of the business advocacy group Smart Business Hawaii, said the state’s high general excise tax, which has a multiplier effect because it is charged at every level of transaction, is a “big killer.”

The state’s high unemployment taxes, both high in percentage and dollar amount, also hurt business.