Texas endured a wrenching budget crisis last year. While the state is still not out of the fiscal woods, it managed to emerge with its sterling, triple-A bond rating and stable outlook intact.

The state had to make some sacrifices though, and that hurt in some categories. Texas comes in 26th inEducation and 35th in Quality of Life. And while the state held the line on income taxes, the overall tax burden — including property and sales taxes — is high. That hurts Texas in the all-important Cost of Doing Business category, where it comes in 28th.

Since we began ranking the states in 2007, Texas and Virginia have traded places each year in first and second place. But the pattern was broken in 2012.

This year’s runner up is not Virginia butUtah, which surged from last year’s eighth-place finish. The Beehive State boasts low costs (11th lowest for Cost of Doing Business, sixth for Cost of Living), a world class Workforce (ninth place) and moves into the top 10 for Quality of Life. The state has seen an impressive influx of venture capital of late, jumping ten places to 13th for Access to Capital, and its Infrastructure improved to eighth place this year.

Virginia: Road to Trouble

So what happened to Virginia — last year’s top state?

The Commonwealth is still a contender, finishing a solid third overall. But it faltered in two categories in particular: Infrastructure andEconomy.

Infrastructure — specifically the state’s perpetually clogged highways — has long been an issue in fast-growing Virginia, and there is fresh evidence this year that the state is having trouble keeping pace. With some of the country's toughest commutes, the state dipped to number 33 in the category, down from 10th a year ago.

Virginia’s economy remains in the top tier. But it has suffered in part due to circumstances beyond its control. The state’s proximity to Washington, DC has helped in previous years. Late last year, however, Moody’s slapped a negative outlook on Virginia’s otherwise pristine bond rating because of the federal government’s fiscal crisis. That contributed to Virginia slipping to 10th from eighth in our Economy category this year.

While still the envy of most states, Virginia declined in a total of six categories in 2012. The other four are Cost of Doing Business (32/21), Education(13/6),Technology & Innovation (14/11) and Business Friendliness (4/3). In this competition, you can’t post that many declines and stay on top — or, it turns out, finish second either.