It's tougher to for a small business to survive in Hawai'i than 41 other states, according to a new ranking put out by a national group that advocates on small business issues.

The ranking by the Small Business & Entrepreneurship Council shows Hawai'i slipped to 42nd in the country from 41st last year. The decline came after the state improved its ranking from near the bottom several years earlier.

It was the 14th year the Oakton, Va.-based group has issued its index that looks at the public policy environment for businesses in each state and the District of Columbia, ranking them in terms of tax and other public policy. Hawai'i has typically ranked poorly in such reviews.

"Businesses are really hard hit," said Pamela Tumpap, president of the Maui Chamber of Commerce.

"We have many worried right now about the coming unemployment tax increase that will hit next April."

She said the Maui Chamber has tried to educate legislators about how various taxes and regulations are affecting businesses. She said some of the measures were tough on companies even before the economic downturn, and now, many have seen a 40 percent drop in revenue.

"We need to find ways to work more cooperatively together," Tumpap said.

South Dakota again ranked as the most business-friendly area in the nation while the District of Columbia repeated as the least friendly.

The Small Business & Entrepreneurship Council said many state and local lawmakers had made policy changes in the past year that increased the cost of entrepreneurship, investment and operating businesses. In all, the study ranked states on 36 government-imposed or -related costs.

In the survey, Hawai'i ranked worst in terms of having the highest top-tier personal income tax rate (11 percent) and having the highest sales or excise tax as a percentage of personal income (6.46 percent).

Hawai'i's nation-leading electricity rates gave it 51st place in this category and the Islands also ranked worst in diesel fuel taxes.

The study is available at www.sbecouncil.org/survivalindex2009.