Alberta is headed for some lean years.
A potential trade war with the United States on the horizon and Canadian potential retaliation, Alberta is facing budget challenges going into 2025, according to the budget released by Minister of Finance Nate Horner on Feb. 27.
“Budget 2025 is a budget of tough but measured choices that meet the needs of Albertans and maintains our Alberta Advantage,” said Minister Horner, via a media release. “It cuts taxes, steadfastly supports public services and solidifies our economic foundation so it can withstand future headwinds.”
While the budget is introducing the government’s new eight per cent personal income tax bracket for earners up to $60,000 earlier than planned, the budget is also forecasting multi-billion-dollar deficits in the next three years.
Budget 2025 forecasts a deficit of $5.2 billion this year, followed by a deficit of $2.4 billion in 2026 and $2 billion in 2027 before returning to balance in 2028.
Under the government of Alberta’s fiscal framework, the province may run a deficit when there is a revenue drop, provided the balance is restored within three years.
The budget was formed based on the assumption that U.S. tariffs will be implemented at an average of 15 per cent, with 10 per cent on Canadian energy, and expected retaliatory tariffs, which will limit the province’s growth potential.
When asked why the ministry factored tariffs at 15 per cent instead of Trump’s touted 25 per cent, Horner responded that there were multiple reasons. He noted that 25 per cent tariffs did not seem reasonable for long-term viability and even if they do come in, he can’t see them lasting for long as neither country would be able to tolerate them. Additionally, the 15 per cent helps provide an average if the 25 per cent is brought in and then removed during the course of the year.
With job gains lagging and record-high immigration to Alberta in 2024, unemployment in the province is anticipated to stay around seven per cent for the next two years while the economy grows overall at around two per cent by 2027.
Part of the reason for the deficit budget is depressed oil price forecasts; Budget 2025 is forecasting WTI Oil, which Alberta bases most of its budgeting on, to trade at around $68 per barrel, down from $74 per barrel in 2024-25. For every dollar loss in WTI Oil, the province loses around $750 million in revenue.
Due to all the factors mentioned, the province’s gross domestic product (GDP) growth is anticipated to drop to 1.8 per cent in 2025 and 1.7 per cent in 2026 before climbing again in 2027.
Overall, revenue is estimated to be around $74 billion against total expenses of $79 billion.
“This deficit is largely the result of falling non-renewable resource revenues and increases in costs necessary to provide world-class services to Albertans,” notes the release.
Expenses in 2025 include $2.6 billion for schools, $1.1 billion for family, social supports, and housing, $2.5 billion for roads and bridges, $3.6 billion for health, mental health and addiction, and continuing care facilities, $7.5 billion for municipal infrastructure support, and more.
Government operating expenses are estimated to sit around $64.3 billion this year, an increase of $2.2 billion from 2024, and increasing to $64.8 billion in 2026-27.
The entire capital expense plan for budget 2025 is forecast at $7.7 billion, $635 million lower than budget 2024.
Other specific notes from the release include the province investing $28 billion into the newly refocused health care system and $9.9 billion for education to support hiring “thousands more teachers and support staff, lower class sizes, and enhanced educational support to students with complex needs.”
“All Albertans deserve access to the best our health care and education systems have to offer,” said Horner. “Alberta is growing as many families choose as home. Budget 2025 will help meet the growing demands of the province while continuing to provide the services Albertans have come to rely on.”
When asked about the budget process, the threat of tariffs, and basing the tariffs on a lower number, Horner was asked if he was aware of something the other provinces were not. Horner noted that he was not and the information used to put the budget together was collected from publicly available sources.
Residential properties across the province will be paying more this year for the education requisition as property taxes are increased to 31.6 per cent in 2025 and then to 33 per cent in 2026.
