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The State With the Best Cost of Living

By Jennifer Leigh Parker, Special to

NEW YORK ( CNBC) -- Everyday expenses have a direct effect on the price of doing business, which is why we rank the Cost of Living for each state in CNBC's Top States for Business.

So where would a business find a state with a reasonable cost of living? Our survey results show states with the best bang for your buck are in the South.

Kentucky tops our list with 50 out of the 50-point total for this category.

Moving up from 3rd place last year, the state boasts the lowest costs in the nation for groceries and healthcare, with extremely competitive costs for housing, transportation and utilities -- all three part of the basic criteria used for this ranking.
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Runners-up, however, are hot on the heels of the Bluegrass state. Tennessee (2/1) and Oklahoma (3/1), finished only two points behind, having tied for first place last year.

They are followed very closely by Arkansas (4/3) and Texas (5/8). The Lone Star state gained ground this year, jumping up three spots, thanks to low-cost groceries and gasoline.

Comparative Costs
As for the most expensive states, we've got some repeat offenders: Hawaii (50/49), Alaska(49/47), and California (48/49) each ranked as the bottom three last year.

Compare the cost of the American Dream: to drive the kids to school from your single-family home in, say, San Jose, Calif., the median price will set you back $545,000 as of the first quarter of 2011, and $4.09 a gallon for gas, according to a recent spot check on

In contrast, residents of Louisville, Ky., pay a median $125,000 for their home, while the trip to school costs only $3.85 per gallon.

However, that old rule still applies: you get what you pay for. The top states in this category also happen to be the lowest ranking in the Quality of Life category, and vice versa.

The state coping with the biggest increase in costs is South Dakota (26/5). There, costs are relatively high for health care, but those for housing and utilities have risen as well. But higher costs parallel higher quality, as South Dakota broke into the top five rankings for Quality of Life.

Purchasing Power
Regardless of the rankings, the impact of inflation can be felt across all states. For example, the price of gasoline has jumped with the volatile price of crude oil. Consumers in

Nashville, Tenn., have seen gas prices jump 42% since this time last year, while Honolulu residents are paying only 15.3% more for gas than a year ago.

-- Written by Jennifer Leigh Parker of CNBC
CNBC is a world leader in business news, providing real-time financial market coverage and business information.

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