And the report is not simply another partisan opinion piece. It examines dozens of public policy measures to determine whether state governments are expanding individual liberty or imposing additional restrictions on their residents.
A Damning Assessment of Newsom’s Leadership
The Cato Institute’s 2026 report represents a significant expansion of its longstanding state freedom rankings. For the first time, researchers also evaluated all 50 sitting governors based on how their individual decisions affected economic and personal freedom.
The assessment considered 97 policy variables divided into 10 major categories.
These included taxation, government spending, housing regulations, occupational licensing, education options, firearm rights, medical freedom, law enforcement practices, and freedom of speech.
Newsom’s performance placed him 48th nationally, ahead of only Hawaii Governor Josh Green and New York Governor Kathy Hochul.
That is hardly the kind of recognition a politician hoping to lead the country would want.
Even more interesting is the fact that Colorado Governor Jared Polis, a Democrat, finished second in the governor rankings. Montana Republican Greg Gianforte took first place.
The comparison makes it harder to dismiss the findings as simply a partisan attack against Democratic leadership.
According to Cato, governors are evaluated based on the direction they personally move their states rather than simply receiving credit or blame for policies inherited from previous administrations.
In other words, Newsom’s ranking reflects the institute’s assessment of his own governing decisions.
California’s Tax-and-Spend Approach Faces Fresh Scrutiny
One of the most controversial aspects of Newsom’s administration has been its approach to taxation and government spending.
California’s 2026-27 budget contains approximately $351.7 billion in total state spending, while its revenue provisions introduce several additional burdens on businesses and other taxpayers.
Among the changes is a new sales tax on certain digitally delivered software products, including cloud-based software services, scheduled to take effect January 1, 2027.
The Legislative Analyst’s Office estimates that this measure alone will generate approximately $900 million annually for the state’s General Fund and another $1.1 billion for local governments once fully implemented.
The budget also renews a tax on healthcare plans, with a projected $2.3 billion in net revenue over the relevant period, and extends restrictions on business tax credits.
These measures add to the financial pressures facing companies operating in an already expensive state.
The California Taxpayers Association has criticized the state’s approach to expanding its tax base. The source material quoted a spokesperson describing the increase as “the largest tax hike in state history from a dollar standpoint.”
That criticism reflects a broader concern among business advocates: California continues to seek additional revenue while companies and residents are already dealing with substantial operating and living expenses.
For Newsom, the challenge is explaining why another round of revenue increases should inspire confidence in his economic leadership.
The Cost of Doing Business in California
California’s economic difficulties extend beyond its tax policies.
Businesses must navigate extensive licensing requirements, employment regulations, and complicated land-use rules. Meanwhile, housing construction has struggled to keep pace with demand, contributing to some of the highest home prices in the country.
The result is an increasingly difficult environment for families trying to purchase homes, entrepreneurs attempting to establish businesses, and employers seeking to expand their operations.
Housing affordability remains particularly troublesome.
While Newsom has repeatedly announced initiatives intended to accelerate construction and address homelessness, the underlying affordability problem remains a major political liability.
The Cato report’s inclusion of housing and occupational freedom is especially relevant here. These categories examine how government restrictions affect people’s ability to build homes, pursue careers, and operate businesses.
The broader question is whether California’s regulatory system has become an obstacle to the very economic opportunities state officials claim to support.
Californians Continue to Leave
Another major concern is California’s persistent domestic population losses.
According to the California Department of Finance, the state experienced a net domestic migration loss of approximately 216,000 people between July 2024 and July 2025.
Although international migration and natural population growth have helped offset some of those losses, the continued departure of domestic residents remains a significant warning sign.
Los Angeles County has also experienced substantial population declines in recent years.
For many households, the decision to relocate comes down to affordability. Housing costs, taxes, insurance, and everyday expenses can make establishing a comfortable life increasingly difficult.
And California is not the only destination losing residents to domestic migration. States such as Arizona, Nevada, Florida, Idaho, and Montana have become attractive alternatives for people seeking different economic and regulatory environments.
The Cato rankings offer another interesting perspective on that competition.
Arizona finished first among states overall, followed by Montana, Nevada, Florida, and Idaho.
That contrast is particularly uncomfortable for Newsom, whose administration has frequently portrayed California as a national example of progressive governance.
Newsom’s National Ambitions Face an Uncomfortable Question
Perhaps the biggest political implication of the Cato findings concerns Newsom’s ambitions beyond California.
For years, the governor has cultivated a national profile, positioning himself as one of the Democratic Party’s most recognizable critics of President Donald Trump and Republican leadership.
He has traveled outside California to challenge conservative governors, participated in national political debates, and used his office to build relationships with Democratic voters across the country.
But a presidential campaign would inevitably bring renewed attention to his record in Sacramento.
The Cato report provides critics with another argument against elevating Newsom to the nation’s highest office.
If his governing philosophy has produced a 48th-place finish among America’s governors, voters may reasonably ask whether expanding that approach to Washington would produce better results.
There is also an important detail Newsom’s political team cannot easily ignore: Jared Polis, another Democratic governor, finished second.
That suggests Democratic leadership does not automatically produce the same results everywhere. Different policy decisions can lead to substantially different assessments.
Montana’s Greg Gianforte, meanwhile, earned the report’s highest gubernatorial grade, receiving an A.
The contrast offers a useful reminder that state leadership can be measured by more than speeches, political messaging, and carefully orchestrated appearances.
Ultimately, the Cato Institute’s findings add another challenge to Newsom’s national political ambitions.
He can continue criticizing Republicans and promoting California as a progressive success story. But his administration’s record will remain part of the conversation.
Before asking Americans to trust him with the entire country, Newsom may first have to explain why his own state’s governor ranking places him near the very bottom of the nation.
The question facing voters is straightforward: If California is supposed to be the blueprint for America’s future, why does its governor have such a disappointing record in a national assessment of freedom?
