At the end of this fiscal year, the government of California may, despite the energy crisis, continue to run a budget surplus. This should surprise no one. California has run budget surpluses—many of them quite large—in the face of calamities that have left other states struggling to avoid red ink. In fact, California’s budget surplus has survived wars, inept government, and ballot propositions that limit taxation, such as Proposition 13. It has also survived a number of recessions and energy crises.

“Balanced budgets” and “fiscal responsibility” are seen almost universally as synonymous. Indeed, both federal and state laws require that states balance their budgets. Further, states are not free to run deficits financed by borrowing or printing money. One may conclude that continuous budget surpluses are great achievements of California lawmakers. Yet, nothing could be further from the truth. While there can be no question that the legislature is legally responsible for balancing the budget, there is a much larger issue at stake—the effect of the heavy tax burden that Californians face in order to create these surpluses.

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