Alberta's $5.2B budget deficit could jump to $8.7B under worst-case tariff scenario
Province delivering tax cut for incomes under $60K, as promised in election
Alberta is forecasting it will end the next fiscal year with a $5.2 billion deficit but that could soar to $8.7 billion under a worst-case tariff scenario outlined in Thursday's provincial budget.
Finance Minister Nate Horner introduced the budget for the 2025-26 fiscal year amid great uncertainty for Alberta and Canada, just days before the U.S. tariffs are set to come into effect.
"Alberta's government is making responsible, though difficult, decisions to fund the priorities of today," Horner said at a news conference prior to tabling the budget. "We must do the right things to ensure we remain steadfast in the face of oncoming headwinds."
U.S. President Donald Trump said the tariffs — 10 per cent for Canadian oil and gas and 25 per cent for all other exports — are coming on Tuesday.
The Alberta budget outlines three scenarios. There are best-case, worst-case and middle ground scenarios that the document is based on.
Alberta government officials estimate the worst scenario could result in a loss of $3.5 billion in revenue in the 2025-26 fiscal year and cost 90,000 jobs over the next three years.
Estimates in the budget are based on the assumption that average tariff rate for sectors outside of oil and gas will be 15 per cent over the year.
Horner said he thinks that assumption for the non-oil and gas sectors is a "reasonable place to be," given the uncertainty.
"We think 15 per cent is a sustainable rate that could be left in," Horner said. "It could be 25 per cent for a few months and come back to zero. This has to be an average of the entire fiscal year. So we think this is a prudent place to budget from."
Tax cut, oil price drop
The government is introducing a lower, eight per cent personal tax rate on income under $60,000, which was promised by Premier Danielle Smith in the 2023 election campaign. The government says it will save Albertans as much as $750.
The tax cut will cost the government $1.2 billion in the 2025-26 fiscal year.
There will also be a tax hike on the portion of municipal property taxes that goes toward education.
The budget predicts three years of deficits, largely due to a $4.4 billion decrease in oil and gas revenue from what was forecasted in the current year's budget. Non-renewable resources make up 23 per cent of the province's current revenue.
WATCH | Here are five key takeaways from the Alberta budget:
The price of a barrel of West Texas Intermediate oil, the benchmark Alberta uses for budgeting, is estimated at $68 US in 2025-26. That's a drop of $6 from the previous year's budget.
This is the first deficit budget for an Alberta government since the 2020-21 fiscal year, presented during the early days of the pandemic.
The debt is forecasted to reach $83 billion by the end of the 2025-26 fiscal year.
The government also doubled its contingency fund to $4 billion to cover the effects of tariffs, wildfires and wage increases from public sector bargaining.
Opposition response
NDP Leader Naheed Nenshi said the budget has little guidance for how to navigate the rocky economic waters that lie ahead with tariffs.
Even the cut to personal income tax doesn't offer much relief as it will be offset by increases to education taxes and other increases, Nenshi said.
Lower-income Albertans will see less relief from the cut than those with larger salaries, he said.
Nenshi said the budget shows that the government is unable to manage its finances.
"Even if somehow we skated free of the tariffs, we would still have a $3 billion deficit this year," he said. "I have never seen a government waste money like this. I have never seen a government that is this bad with money and I've seen a lot of bad governments."
Renewed money for cities
The province is restoring the grants in lieu of taxes on provincially owned properties, after cutting them in half in 2020. The funding will go up to 75 per cent in 2025-26 and be fully restored in 2026-27.
While the cut affected many Alberta communities, the City of Edmonton sustained the largest impact as the provincial capital.
While the province is offering a lower tax bracket for income under $60,000, education property taxes will go up over the next two years so that they cover one-third of education funding.
On average, people in Calgary will pay $239 dollars more. In Edmonton, where property values are lower, the average is $92.
The budget allocates $25 million for border security initiatives announced last month. Increased patrols along the border between Alberta and Montana were introduced to address security concerns raised by Trump.
Education spending is budgeted at $10.4 billion, which includes $9.9 million for operating expenses. The province is changing a controversial funding formula introduced in 2020 that critics said hurt fast-growing urban schools at the expense of rural schools.
The budget allocates $2.6 billion over three years to build and modernize school spaces.
Health care spending is estimated to be $24 billion. The funding covers the four health care organizations the government is creating from Alberta Health Services.
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