Alberta’s financial future appears uncertain as the government acknowledges its first significant fiscal shortfall since the pandemic. On Thursday, Finance Minister Nate Horner unveiled Budget 2025, forecasting a deficit of $5.2 billion for the upcoming fiscal year, which begins on April 1.
The budget, titled “Budget 2025,” was met with concerns both for its projected fiscal shortfall and the impact of impending tariffs from the United States. These tariffs, anticipated to reach as much as 25 percent on Canadian goods, threaten to exacerbate already challenging economic conditions.
“Alberta's government is making responsible, though difficult, decisions to fund the priorities of today,” stated Minister Horner. The finance minister warned of potential job losses, predicting as many as 90,000 jobs could vanish over the next three years, particularly under the worst-case tariff scenario.
During the budget announcement, it also became clear to Albertans they should be prepared for tough conversations about government funding priorities. “We’re going to have to have hard conversations as Albertans about what we expect government to fund, the services we want to see,” Horner reflected.
One significant aspect of the budget is the announced tax relief for Albertans. The province will implement a new eight percent personal income tax bracket for taxpayers earning less than $60,000, aligning with Premier Danielle Smith's promise made during the 2023 election campaign. This tax cut is estimated to save individual taxpayers up to $750 annually but will cost the province approximately $1.2 billion.
“It’s one thing to look at what Alberta can withstand through all of this uncertainty,” Horner expressed, emphasizing the financial impact of the anticipated tariffs. The situation is made more dire by the drop in oil prices, which is expected to average $68 per barrel, down from $74 forecasted last year.
“For every dollar loss in WTI Oil, the province loses around $750 million in revenue,” Horner noted. He elaborated on two significant scenarios the budget outlines: one reflecting steady growth, the other indicating significant economic downturn due to tariffs. The latter suggests potential revenue drops by as much as $3.5 billion.
The budget anticipates job losses of 15,000 as soon as this year if trade tensions escalate. The average tariff rate is estimated at 15 percent for non-energy exports, which reflects concern over potential trade wars. Horner has emphasized the need for prudent budgeting under these uncertain conditions. “This has to be an average of the entire fiscal year. We think this is a prudent place to budget from,” he stated.
The financial forecasts suggest Alberta will navigate through consecutive deficits over the next couple of years: $5.2 billion for 2025, followed by $2.4 billion and $2 billion for the next two years. The province plans to return to balance by 2028.
Horner also highlighted the importance of health care and education funding, indicating significant investments would be made to support these sectors. The funding for the health system is projected to increase by $1.7 billion, with another $9.9 billion earmarked for education to meet growing demands.
Despite projected deficits, the provincial government has not turned its back on supporting Albertans. The budget includes nearly $185 million for Career and Employment services, asserting commitment to provide pathways to employment for individuals with disabilities.
Meanwhile, social support programs are seeing funding cuts due to growth projections not being met, with the Assured Income for the Severely Handicapped (AISH) program losing $49 million. Such reductions highlight the balancing act the government faces between tax cuts and social services.
“The maximum benefit for the Canada Disability Benefit will be up to $200 per month,” Horner said, aiming to assure AISH recipients they will not see reduced overall support.
High inflation and strong population growth, at approximately 3.9 percent since the last budget, are also pressing challenges for the Alberta government as it operates within delicate financial constraints. General operating expenses are forecast to be around $79 billion, marking a significant increase.
Also notable is the plan to double the contingency fund to $4 billion to mitigate future economic uncertainties.
“We made the difficult decision to run on deficit to direct and target our spending,” Horner mentioned, framing the future challenges Albertans will need to navigate as they adapt to the realities of Budget 2025.
While there may be troubling financial forecasts, the Alberta government remains committed to supporting core services and responding with necessary measures as challenges arise. The overall message from the Finance Minister was one of cautious optimism, as Alberta faces the economic waters of uncertainty.