By Stephen Smoot
In the past two months, West Virginia has improved its position on a nationwide ranking of states. This ranking service, known as the Red Tape Index, charts a number of factors to rank all states, as well as the top 100 cities, in terms of important factors of business friendliness.
Factors measured include rankings in fiscal health, land use, labor, population growth, affordability, infrastructure, cost of doing business, business friendliness, and, the most important priority, the efficiency of securing government approval on necessary permits.
The rankings update every three months for cities and states. West Virginia edged forward from 31 to 29.
Rankings originate from an artificial intelligence based company called Labrynth. This company has crafted programs that use AI to evaluate the difficulties of doing business in terms of obligations to the government. It typically works as a consultant or contractor to both businesses and government to evaluate the regulatory environment.
Red Tape Index represents a service and a product of that company.
Stuart Lacey, Chief Executive Officer of Labrynth, explained how it works, saying “You look at it in terms of a state like West Virginia. What we’re talking about is the time taken to move from a permit application to a completed project.” He shared how the service can help both private sector or non profits navigating the environment, but also government entities truly dedicated to making processes easier for people and businesses to use for permitting
Lacey explained that until the advent of AI technology, the evidence of efficiency or lack thereof was usually “anecdotal.” People relied on word of mouth about “bottlenecks that stall investments, slow down job growth, economic growth. And we can point to places where modern tools could turn red tape into green lights.”
Factors ranked are derived from the analysis of 175 datasets from “publicly available inputs.” These include data from sources on taxes, media, facilities, the freedom index, permitting data, market economic data, and much more.
The rankings opened last summer with the initial publication of state data. City data emerged last month. Soon will come a third component of the rankings, a platform where those engaged in these fields can leave ratings and commentary, like Trip Advisor for tourism.
During his campaign for Governor last year, Patrick Morrisey promised to treat cross border economic rankings like the West Virginia University and University of Pittsburgh “Backyard Brawl.” His promise was to change Mountain State conditions to better those in neighboring states.
In the most recent rankings, Virginia achieved 11th place, Ohio 18th, Pennsylvania one step below West Virginia at 30, Kentucky at 33, and Maryland barely above notoriously inefficient New York and California at 42.
West Virginia ranks second in affordability and also performs very well in land use at 10th. Virginia ranks 15th in affordability and 15th in land use while Ohio rates 23rd and 19th in those categories respectively.
The Mountain State falls behind in population growth at 49 and infrastructure at 43rd; neither of those issues offer quick fixes. That said, the biggest factor that creates the difference between West Virginia and better performing neighbors is permit efficiency.
In Executive Order One from Governor Morrisey, he legally established the “Backyard Brawl” concept. The order read “various State taxes, fees, regulations, workforce and licensing rules, have created barriers to peoples’ ability to live, learn, work, and play in West Virginia and . . . have also discouraged the growth and development of enterprise in the state.”
The Red Tape Index reflects, according to its website, “each state’s regulatory efficiency, with lower scores indicating faster permit processing and less bureaucratic red tape” with lower scores reflecting better performance. Virginia scores at 4.36 and Ohio at 3.86.
Interestingly, Massachusetts has a score of one despite an overall placement of 35. West Virginia rates a 10.22, which outstrips Pennsylvania at 13.11 and Kentucky at 50, but Maryland scores well at 6.05.
Addressing the permit efficiency issue, however, would attract outside business and native entrepreneurship, which would provide incentive or resources for improvement in other fields.
