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Bad business ratings
require state reforms

THE ISSUE A think tank has rated Hawaii as the most expensive state in which to do business.

HAWAII'S surging economy has not disturbed its reputation as the costliest state to do business. The latest assessment placing Hawaii in last place is the Los Angeles-based Milken Institute, a centrist think tank that has ranked states on comparative costs of doing business. The basis for the ranking leaves little hope that Hawaii will emerge from the cellar anytime soon.

Fifty percent of the ranking is weighted on wages, where Hawaii's $34,135 annual wage average is about $3,000 less than the national average. However, Hawaii was most expensive in rates of state and local taxes, electricity and warehouse rentals, and was tied for the sixth-highest office rents -- more than offsetting the relatively low wages.

Overall, Hawaii's costs in those areas are 43 percent above the national average and 13 percent above those of second-costliest New York, according to the report.

Such a gloomy picture is nothing new. A report measuring "economic freedom," according to standards set by a scholar with libertarian-conservative ties, ranked Hawaii 39th last year among states in levels of government regulation and taxation. A report by Economy.com, a forecasting firm, placed Hawaii's 2003 business costs lower than only Massachusetts and California.

Last October's annual survey by a conservative advocacy group called the Small Business Survival Committee ranked Hawaii next to least friendly to business, ahead of only California. That survey and the Economy.com rankings used data that preceded California's reform of workers compensation; Hawaii, where such reform was rejected by this year's Legislature, can be presumed to have fallen behind the Golden State.

Like the other studies, it might be unfair to compare states that have little in common geographically and economically. "It's not so much where you are in relation to New York and California, said Armen Bedroussian, a senior research analyst at the Milken Institute. "You want to look at where your state ranks compared to your neighboring states." That is difficult in Hawaii.

"Right now the Hawaii economy is as good as it has ever been," Mike Fitzgerald, president of Enterprise Honolulu, a nonprofit promotion group, told the Chicago Tribune. "Hawaii is not a place that every company that comes here will flourish, but every business that is here is flourishing." He said the 27,000 employees in Honolulu businesses that develop high-tech and biotech products "are making as much here as in Silicon Valley."

Such economic bliss should not cause legislators to continue their complacency. This year's Legislature rejected bills aimed at returning health insurers' excess reserves to subscribers, reducing tax payments into a bulging unemployment tax fund and streamlining workers comp. Those issues and more should be addressed and acted upon in the next session.

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