A budget surplus occurs when a government is running efficiently. It is generating more revenues than expenses and therefore has money left over. Individuals prefer to call a surplus “savings.” When the economy is doing well, there is less demand for government services since more people are employed.
When a government creates a surplus, whether, at the federal, state, or local level, citizens will often call for taxes to be lowered. Basically, they are saying that the government has a surplus because it charged too much in taxes. A surplus may be put aside as part of a rainy day fund or to pay off debt that was incurred during a budget deficit.