Why Hawaii, America’s paradise, is also the worst state for business

First, the COVID-19 pandemic hit Hawaiieconomy.

Then, just as the state was beginning to recover, last summer’s deadly Maui Wildfirekilling more than 100 people, destroying more than 2,000 buildings, causing $5.5 billion in economic losses and once again paralyzing the state’s tourism industry.

Final Finish In CNBC’s 2024 Competitiveness Rankings, The best states for business in the U.S.which seems minor compared to all of this. But Hawaii’s economic problems run deeper than the state’s high-profile tragedies.

Consider the Honoapiilani Highway.

Hawaii Highway 30 runs around Maui’s west coast. Even before the fires, state transportation officials warned in a 2021 report that Climate Risk Report The highway faces the threat of falling rocks, landslides, huge wave floods, storm surges, coastal erosion and even tsunamis. At present, some sections of the road have been frequently closed due to flooding.

“Based on our understanding of the changes taking place, we will need to make some difficult decisions to ensure the long-term viability of the country,” the report said.

Hawaii will never fare well in the competitive rankings Emphasis on infrastructureJust like this year. The state’s remoteness — 2,400 miles from the mainland — as an island chain doesn’t make essential infrastructure like freight railroads that are important elsewhere. But now, existing infrastructure is threatened, too, like the Honoapiilani Highway.

“This is the only access from the area where the wildfires are burning to the rest of the island,” said U.S. Transportation Secretary Pete Buttigieg. Visited Hawaii in February.

The state will receive $2.8 billion under the bipartisan infrastructure bill, nearly half of which will go to rebuilding bridges and roads. About $160 million of that will go to relocating portions of the Honoapiilani Highway.

“We’re paying them to build that highway to higher ground,” Buttigieg told CNBC. “If a road is being washed out by a 100-year flood year after year, we’re not going to force somebody else to build it the same way.”

Transportation planners say the improvements won’t be completed until at least 2027. That, combined with the many other roads and bridges that need help, explains why Hawaii’s infrastructure ranked 47th in this year’s study of the top states.

The high cost of paradise

Hawaii is also the most expensive state to do business in the U.S. and ranks third in cost of living. Residents and businesses pay the highest utility bills in the country, and corporate and personal income taxes are also high.

With all these inherent disadvantages, why doesn’t Hawaii rank last every year? Part of the reason is that Hawaii has an extremely high quality of life. But now, even this is under threat.

Hawaii’s quality of life ranks No. 7 in 2024, its lowest ranking in this important category since our Top States study began in 2007.

That’s not to say Hawaii isn’t still a paradise. But even in paradise, working families need child care.

While Hawaii has licensed child care, the cost is prohibitive. According to Child Care Awareness America, child care costs in Hawaii consume 18% of the average married couple’s income. That’s the most expensive in the country and nearly double the national average.

many kinds of study Linking quality child care and preschool to economic competitiveness.

In 2022, the Hawaii Legislature approved $200 million for new pre-K classrooms as part of a broader goal championed by Lt. Gov. Sylvia Luke to provide universal pre-K for the state’s three- and four-year-olds by 2032.

“Access to preschool is a social justice issue for Hawaii,” Luke said in a statement. statement “Children who attend high-quality preschool or child care programs are better equipped to succeed in kindergarten, but not every family has access to early learning programs.”

The plan was to build 80 new classrooms by August this year, and then set ambitious annual targets. website For the program Luke’s office manages, the project has already failed to meet its goals. Two years after the bill passed, only about half of the money has been spent. Only 13 classrooms have been built, with another 50 under construction. Physical facilities are only part of the battle. Hawaii also faces serious Child care worker shortage.

A tough economic recovery

According to the Best States study, taking all of the above factors into account, the U.S. economy ranks second to last, second only to MississippiIt’s no surprise that no major companies are headquartered there. Economic growth was modest last year and job gains were modest at best as the state struggled to recover from wildfires.

In their recent Quarterly Economic OutlookForecasters at the state Department of Business, Economic Development and Tourism reported in June that tourism fell 4% in the first four months of the year, largely because of wildfires, and was expected to be flat by the end of the year.

They do expect visitor traffic to rebound next year and continue to grow — albeit at a more modest pace — until 2026.

But in the state that ranks last in U.S. business performance, they’ve learned through painful experience that nature may have other ideas.