After three consecutive years of surpluses, the Alberta government’s 2025 budget forecasts deficits for the next three years, in response to declining oil revenues and economic uncertainties. At the same time, Albertans can expect further tax relief and record investments in healthcare and education.
Aside from a few exceptions, Alberta’s legislated fiscal framework requires annual balanced budgets. When an acceptable deficit is reported, the provincial government has three years to return to a balanced budget.
The Alberta government unveiled its 2025 budget on Thursday, estimating a $5.2 billion deficit for 2025-26, followed by $2.4 billion and $2.0 billion deficits in the subsequent years. However, the province warned that these projections could change pending U.S. President Donald Trump’s tariff threat.
Revenue is expected to decrease steeply between 2024-25 and 2025-26 before recovering near parity by 2027-28. Meanwhile, total expenses are expected to rise annually.
One of the UCP government’s key campaign promises—a tax cut—will be implemented in 2025, two years ahead of schedule.
The provincial government is implementing a new eight per cent personal tax bracket for income up to $60,000. The tax cut is expected to save individual Albertans up to $750 in 2025.
Albertans earning less than $60,000 per year will see their personal income taxes fall by 20 per cent. Albertans are expected to collectively save $1.2 billion in 2025 due to this measure.
However, the province is paying the price, as the tax break will reduce revenue from personal income taxes down to $15.5 billion in 2025-26, from $16.1 billion in the last budget update.
The province’s tax advantage was highlighted in its fiscal plan. The province showed that Albertans and Alberta businesses would pay at least $20.1 billion more in taxes if they lived in the province with the second lowest taxes in the country, B.C. If they lived in the highest tax province, P.E.I., they would pay $36.0 billion more in taxes.
Alberta will also invest a record $28 billion in healthcare to introduce its refocused healthcare system.
“The budget supports the government’s plan to provide targeted, specialized care in the four areas of acute care, primary care, mental health care, and continuing care,” reads the province’s press release.
When the province first discussed the budget, it said it would address the economic pressures from the population surge, and the education funding aims to do just that.
Kindergarten to Grade 12 education will also see its highest-ever operating budget of $9.9 billion. The record spending is said to address enrolment growth from the booming population.
“Budget 2025 will help hire thousands more teachers and support staff, lower class sizes, and provide enhanced educational support to students with complex needs,” reads the release.
The Albertan government announced various school development projects to deliver over 100 new and updated schools—equal to around 200,000 student spaces—over the next seven years.
An additional $7.4 billion will be invested in post-secondary education.
Despite a recently surging population, the province expects population growth to slow to 2.5 per cent in 2025, down from a record 4.4 per cent growth in 2024. Alberta anticipates population growth to further decrease to 1.4 per cent in 2026 and 2027, and another 1.6 per cent in 2028.
With the rising uncertainty of tariffs, as Trump appears to constantly change his mind on when they will come into effect, the Alberta government showcased various scenarios based on how the tariffs would affect the budget.
The baseline values provided in the budget assume a 15 per cent tariff on all goods, with 10 per cent tariffs on energy.
In the low scenario, signalling a decline in revenue, 25 per cent tariffs would be put on all Canadian goods, except for energy products, which would see 10 per cent tariffs. If this were to occur, the Alberta government projects a deficit of $8.7 billion in 2025-26, falling to $7.0 billion in 2026-27 and $5.4 billion in 2027-28.
The high scenario assumes no tariffs, but the looming uncertainty would come with a higher exchange rate volatility, a swing in energy proxies and disruptions to the supply chain. The high scenario also assumes no retaliatory tariffs from Canada, resulting in lower inflation, growth in spending, and more. In this scenario, the province predicts a $2.9 billion deficit in 2025-26, falling to $500 million in 2026-27, and $200 million in 2027-28.