Hawaii is America’s Worst State for Business in 2026

Hawaii has some built in disadvantages in just about any state competitiveness ranking. Its location makes almost everything expensive. Its size limits development. And many of the usual measures of infrastructure don’t apply — freight rail service is crucial on the mainland, for example, but it is irrelevant on a Pacific island chain.  

So, The Aloha State — this year’s Bottom State for Business in CNBC’s rankings — is focusing on things it can control, chief among them access to childcare. 

“We know that early learning is really critical to the health and development of our children,” said Yuuko Arikawa-Cross, Director of Hawaii’s Executive Office on Early Learning. “We also know that in Hawaii, in about 60% of households with children, all adults are working.” 

But childcare in Hawaii is the most expensive in the nation, costing 18% of the median income for a married couple with children, according to Child Care Aware of America. And with 531 licensed childcare facilities in a state with 1.4 million people, Hawaii ranks 21st in childcare centers per capita. The National Institute for Early Education Research said that while Hawaii met all the organization’s quality benchmarks last year, it ranked near the bottom for access. 

That poor showing helps push Hawaii to the bottom of CNBC’s overall rankings this year by hurting the state in the one category that has kept it out of the cellar most years: Quality of Life.  

Hawaii finishes No. 6 this year in a category it previously dominated. That means less of an offset for the state’s worst-in-the-nation finishes in Infrastructure and Cost of Doing Business, and its fourth highest Cost of Living. 

Childcare emerges as a major competitiveness issue 

CNBC began factoring in childcare in 2022, after the U.S. Chamber of Commerce identified it as a top reason workers were quitting their jobs — or not returning to work. 

Hawaii took up the issue around the same time, passing a law in 2020 requiring that early learning or pre-kindergarten programs be made available to half of the state’s three and four-year-olds that were not otherwise served no later than 2027, and to 100% of them by 2032. 

Arikawa-Cross said the state is on track to reach the 50% benchmark on schedule next year. 

“We’ve just had a really huge, concerted effort trying to uplift this initiative,” she said. 

Whether the state can achieve the 50% goal next year — or the mandated 100% goal in less than six years — may depend on more issues that are difficult for Hawaii to control. 

Already, early childhood learning programs are facing intense funding pressures at the state and local level.  

Arikawa-Cross said that while her office does not receive direct federal funding other than for one position, officials are looking closely at the specter of federal budget cuts to the Head Start program. 

A key advocate in Hawaii is sidelined 

Another factor has less to do with funding and more to do with momentum. 

The state’s biggest champion of early childhood education is Lieutenant Gov. Sylvia Luke, who established the state’s early learning initiative — called Ready Keiki — in 2023 (keiki is the Hawaiian word for children). The program established a network of partners including government agencies, non-profits and philanthropic organizations to help achieve the universal childcare goal. 

But Luke announced in April that she would take an indefinite leave of absence after confirming she was the target of a state campaign finance investigation. While not admitting wrongdoing, Luke suspended her re-election campaign. This month, a state campaign spending commission disclosed that it had filed a multi-count civil complaint against Luke and five others in May. Luke’s attorneys have asked that the civil case be put on hold because of an ongoing criminal investigation. 

However the case plays out, it leaves Hawaii’s childcare efforts without their biggest advocate just as the first major deadline under the law approaches. 

“Having a cheerleader and somebody who’s there to support your cause and who knows the importance of it was so important,” Arikawa-Cross said. “It’s a very large void right now, and our office does not want to lose the momentum.” 

She said that the work will continue, even if it lacks the high profile champion it once had. 

“We need to stick together, and we need to see this all the way through to the finish line and beyond,” she said. “We’ve made so much progress, let’s not stop now. There’s still so much for us to do.”