(The Center Square) – Arizona can achieve a better free-enterprise ranking if it improves on housing and public safety, according to Zachary Milne, a senior economist at the Common Sense Institute for Arizona.
CSI last week released its annual Free Enterprise Report, which ranks states in nine categories: education, energy, health care, housing, infrastructure, public safety, state budget and finances, taxes and fees, and workforce.
Overall, the report found that Arizona ranked 27th in the country when all these categories were aggregated.
California ranked at the very bottom of the list. Nevada ranked 33rd, and Colorado, 17th. South Dakota was No. 1.
Milne told The Center Square that Arizona’s ranking is in the middle of the pack in its free-enterprise competitive score.
According to the senior economist, Arizona can improve in housing and public safety.
Arizona ranked 40th in housing and 43rd in public safety.
If Arizona wants to “continue to grow and be a destination for businesses and people looking for a better life,” then it needs to get its “housing issue under control,” Milne explained.
The report noted that because of Arizona’s economic success over the last 10 years, many people have moved to the state, especially from California. It said housing construction has not kept up with demand, resulting in higher home prices and limited availability.
In 2011, an average household needed to work about 32 hours a month to afford a new mortgage. Eleven years later, the same household needed to work over 82 hours to afford one, the report said.
CSI released a report last year showing Arizona will always be in a housing deficit.
Arizona needs to build more housing, Milne noted.
The report ranked Arizona 40th in housing competitiveness, 38th in hours to pay mortgage and 34th in hours to pay rent.
Looking ahead, the report said Arizona’s outlook is positive because more homes are being built and migration into the state has slowed down.
For public safety, Milne said Arizona has room to improve this category by reducing its homeless population, drug-related deaths and crime numbers.
In 2024, the report stated overdose deaths declined in America, but Arizona’s decline was one of the nation’s slowest rates.
CSI said the state’s homeless population continues to increase. A Housing and Urban Development report showed in 2024 that Arizona had the nation’s 10th highest number of homeless people, with 14,737.
According to the report, Arizona’s crime ranking has improved in recent years, but the state has not hired enough police officers to keep pace with population growth.
The report showed Arizona ranked 46th in the number of police per crime, 41st in drug overdose deaths and 37th in homelessness.
CSI described Arizona’s future in the public safety category as positive because the state and federal government have pursued additional resources to fight drug and human trafficking along the southern border.
The report said that, due to recent federal policy changes, border states will see their rankings improve in this category in the future.
Another area for improvement is education. The report ranked Arizona’s schools 40th in the nation.
The factors pulling down Arizona’s education ranking are low high school graduation rates and test scores, Milne said.
Arizona has the nation’s 48th-lowest graduation rate. Regarding test scores, Arizona fourth graders ranked 46th in reading and 45th in math. The state’s eighth graders ranked 38th in reading and 29th in math.
In fiscal categories, Arizona ranked in the top 10 in state budget, taxes and fees and economic momentum.
Arizona ranked sixth in state budget rankings, with the report saying the state continues to keep its “debt under control.” The report noted legislators have made an effort to use excess revenue to pay down the state’s general fund debt.
The Grand Canyon State ranked fifth in taxes and fees. CSI’s report said this was due to its low “tax and fee burden.”
Arizona’s state and local taxes and fees totaled 9.8%, which is lower than the national average of 12.8%, the report stated.
The report also highlighted its flat 2.5% tax rate, which is tied for the lowest among states with an income tax. Arizona has also streamlined personal property taxes and reduced business tax rates, the report added.
Arizona ranked first in economic momentum, according to the report. This ranking is due to the state having the fastest five-year average growth in GDP per capita, employment growth and increased incomes. According to the report, Arizona saw “one of the fastest declines” in its overall poverty rate.
In addition to these categories, Arizona also ranked well in energy. The report found Arizona ranked 17th in the country.
Milne called the state’s energy grid “very reliable.” He noted Arizona is well-positioned for the future as data centers and other “high power demand” industries become a part of America’s economy.
