Alberta forecasting $5.2B budget deficit

By Al Beeber - Lethbridge Herald on February 28, 2025.

LETHBRIDGE HERALDabeeber@lethbridgeherald.com

The provincial government is forecasting three years of deficits in its 2025 budget which was released Thursday by Finance Minister Nate Horner.
The deficit for 2025-26 is expected to be $5.2 billion. In 2026-27, the deficit is forecast to drop to $2.4 billion and in 2027-28 to $2 billion.
The province says its fiscal framework includes exceptions when the government can run a deficit, including times when it experiences a significant drop in revenue.
The deficit is “largely the result of falling non-renewable resource revenues and increases in costs necessary to provide world-class services to Albertans,” says the government.
American tariffs are a huge cloud over the economy, with the gross domestic product expected to “decelerate” to 1.8 per cent in 2025 and 1.7 per cent in 2026.
And population growth is expected to be 2.5 per cent this year, down from 4.4 per cent in 2024. That growth will slow to 1.4 per cent over the next two years and increase slightly to 1.6 per cent in 2028, the province predicts.
Contained in the budget is a new eight-per-cent personal income bracket for people with income up to $60,000 which is starting years ahead of schedule. The government expects it will save families up to $1,500 this year.
The budget is taking a cautious approach which reflects the high risk of a trade conflict with the U.S. And that conflict’s potential impact on Alberta’s economy.
The outlook assumes tariffs averaging 15 per cent — lower than those threatened by U.S. President Donald Trump — but a media briefing suggested those 25-per-cent tariffs would inflict too much on both Canada and the U.S. A lower percentage is more likely.
Total revenue for 2025-26 is being forecast at $74.1 billion, which is a drop of $6.6 billion from the 2024-25 forecast of $80.7 billion.
Total revenue is forecast to grow to $77.4 billion in 2026-27 and to $80 billion by 2027-28. The drop in 2025-26 will occur mainly because of a decrease of $4.4 billion in non-renewable resource revenue which is driven by an expected decline in oil prices.
The price of West Texas Intermediate in 2025-26 is expected to be $68 US per barrel.
That revenue source is forecast at $17.1 billion in 2025-26, compared to the $21.5 billion forecast in 2024-25.
Revenue from personal income taxes is expected to drop to $15.5 billion from $16.1 billion at the third quarter because of the new eight-per-cent tax bracket, and from tariffs which are predicted to have an effect on the cost of many consumer goods.
The province’s total expense in 2025-26 is forecast at $79.3 billion, which is an increase of $4.4 billion or 5.9 per cent from the 2024-25 third-quarter forecast.
The total expense is expected to be $79.8 billion in 2026-27 and $82 billion in 2027-28, an increase of about 1.7 per cent per year.
The operating expense is estimated at $64.3 billion, which is an increase of $2.2 billion or 3.6 per cent from the 2024-25 third quarter forecast.
The province expects the operating expense to grow to $64.8 billion in 2026-27 and $66.5 billion in 2027-28, which is an average increase of 1.7 per cent per year.
The costs of servicing debt are forecast to drop by $231 million in 2025-26 from the 2024-25 forecast to $3 billion because funds that were pre-borrowed in 2024-25 will be used to repay debt maturities coming due early in 2025-26.
The budget includes what the province calls a record investment of $28 billion “for a refocused health care system.” This is an increase of $1.4 billion.
The province is investing $9.9 billion in the operating budget for education from kindergarten to Grade 12, which it says will help the hiring of 4,000 teachers and support staff, reduce class sizes and provide enhanced supports for students with complex needs.
That figure is lower than the $11.35 billion the Alberta Teachers Association said is needed to be put into the province’s education system.
And the budget invests $2.6 billion over the next three years for K-12 infrastructure, which is an increase of $505 million over the amount in the last budget.
The province says its three-year capital plan will support growth and development in all areas of Alberta, creating jobs and economic activity.
The unemployment rate will remain elevated but Alberta is expected to fare better than other provinces.
The 2025 capital budget plan calls for spending of $26.1 billion over three years, which is $1.1 billion more than in Budget 2024. The money is “to meet the challenge of growth and build and enhance schools, hospitals, roads and bridges in the province,” says the province. “The plan is projected to support an average of 26,500 direct and 12,000 indirect jobs annually through 2027-28.”
The government says its budget will meet the challenges faced with the cost of living by helping Albertans to keep more money with lower personal income taxes. It also says it is focused on building the Heritage Trust Fund to $250 billion by 2050. That fund was valued at about $25 billion by the third quarter of 2024-25.
In a statement to media, the opposition NDP accused the UCP of cutting funding and ignoring the needs of Albertans.
“Albertans want good jobs and help with the increasing cost of living,” said Court Ellingson, Alberta New Democrat Shadow Minister for Finance. “They also want investments in public health care, public education, and public safety. But with billions in cuts, the UCP’s budget fails to meet the needs of Albertans.”
He said the budget effectively cuts public health care but doubles down on more private surgeries which are at the heart of “the CorruptCare” scandal. It also effectively cuts education funding, keeping Alberta at the lowest per-student funding in Canada.
“Albertans deserve a budget that makes their lives better. This budget doesn’t even attempt to do that.”

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