The article, posted Wednesday on Forbes.com, factored such considerations as business costs, labor, regulatory environment, economic climate, growth prospects and quality of life.
Kevin Dorn, secretary of the state Agency of Commerce and Community Development, said the rating was bad for Vermont.
"This is a concern for us, because business leaders read Forbes magazine and develop some impressions from it," Dorn said. "When we drop, it hurts our ability to attract and retain businesses."
The ranking, however, did not catch Dorn off-guard.
Business costs
"I can't say I'm surprised," Dorn said. "The governor has been talking about these issues for some time, but it's fallen somewhat on deaf ears with the Legislature."
"It's ironic — last year Gov. (James) Douglas was given a four-star review by Inc. magazine, but this year we've fallen two spots," Dorn added.
Dorn said costs had to be addressed in the state. The Forbes article had Vermont ranked 45th in terms of business costs.
Dorn said he hopes such data provides an incentive for the Legislature to act on economic development.
"I would like to think it would — I would like to think people will pay attention to how outside analysts view Vermont," Dorn said. "They have no political ax to grind. They're just writing about what they think and what they know."
"I don't want to see Vermont ranked 34 next year, or 36 the year after," Dorn said.
House Speaker Gaye Symington, though, contends that the Legislature is not at fault. According to Symington, this year's energy bill, which passed the Legislature but was vetoed by Douglas "would have created jobs and helped businesses and other Vermonters reduce energy costs."
"When it comes to the really tough choices to make Vermont more affordable ... it's the Legislature that's taking the lead and not the administration," Symington said.
Botzow on business
State Rep. Bill Botzow, D-Pownal/Woodford, is a member of the House Commerce Committee. He said a number of businesses are doing well in Vermont.
"Business can thrive here," Botzow said. "I think we have a different business climate than other states, with different strengths and weaknesses."
Botzow said current initiatives to improve telecommunications and develop the state's workforce should help the state become more business-friendly.
"One of our state's assets is a good workforce," Botzow said.
Botzow said he felt the Legislature was working hard to help economic development in the state. "It's very easy to make critical comments — I know I'm working towards solutions, and I know many people are working for solutions," Botzow said. "The Legislature has really reached out to work with the administration."
Methodology questioned
Doug Hoffer, a Burlington analyst who has studied the state's economy in depth and frequently criticizes the administration's statements on the state's economic conditions, said he had asked Forbes for details on the methodology behind its rankings and had yet to receive a response.
"Electric costs and taxes for most businesses together represent somewhere between 2 and 5 percent of their overhead. Unless you're an aluminium smelter or a ski area running lifts all the time, your energy costs are just not that big a factor," Hoffer said.
He labeled "meaningless" the fact that Forbes had rated Vermont's quality of life as 10th in the country, behind states including Connecticut and New Jersey.
Peter Odierna, executive director of the Bennington County Industrial Corp., said the ranking was not in line with his personal experience.
"I clearly think that our organization has demonstrated concretely that it is able to get projects done in the Bennington area," Odierna said. "There have been a couple of projects that we competed for and won that were on a nationwide scale."
Vermont's business climate, said Odierna, is far from unwelcoming.
"I believe that, while Vermont does have issues and challenges, it's quite possible to get good economic projects done in the state," Odierna said.
Odierna said, though, that the state could consider several measures to make it more business-friendly.
Paperwork shuffle
"I think Vermont should entertain the idea of pre-permitting for some sites — that would eliminate a large variable," Odierna said. "For example, there's a corporate park on Shields Drive. Even though the park has an umbrella Act 250 permit, businesses still have to go through the permitting paperwork shuffle."
"Also, no matter how you slice it, taxation in Vermont is very high," Odierna said.
Odierna advised that the state start spending more on economic development.
"If you look at a pie chart of the state budget, economic development isn't even a sliver — it's a line," Odierna said. "Vermont needs to be more aggressive with economic development and embrace the concept that the best social program is a good job."
Winter fuel bills
Both Odierna and Dorn said there were some difficulties the state faced in comparison to other states.
"We have a winter heating season, whereas a state like South Carolina doesn't," Odierna said. "However, Vermont competes reasonably well with other New England states."
Odierna added that the energy infrastructure in Vermont in terms of natural gas was not particularly well-developed.
Dorn cited another trouble Vermont businesses face.
"Some things are difficult, like the distance to big markets," Dorn said. "However, the distance hasn't changed over the past year."
Of the other New England states, New Hampshire ranked highest at 18, followed by Connecticut (31), Massachusetts (36), Rhode Island (45) and Maine (48). Virginia was ranked first overall, whereas West Virginia was ranked last.
The Associated Press contributed to this report.