Alberta Budget 2025: $5.2 billion deficit under weight of Trump’s Tariffs

3 KEY TAKEAWAYS:  

• Finance Minister Nate Horner tabled a $5.2 billion deficit budget. 

• Budget includes a personal income tax cut (previously promised). 

• A $4 billion-dollar contingency fund is included to protect against tariffs from the US and natural disasters, such as wildfires. 

With the impact of tariffs weighing heavily on Albertans and the province’s economy, Alberta Finance Minister Nate Horner today delivered a provincial budget titled “Meeting the Challenge.”  

Underscoring those challenges, today’s budget came with an unexpectedly large deficit of $5.2 billion. 

The deficit is forecast to drop to $2.4 billion and $2 billion for 2026-27 and 2027-28, respectively. 

The province’s financial blueprint reflects rising costs incurred due to record-breaking population growth, that has placed increased financial pressure on healthcare, education, and infrastructure investments.  

Horner said he hoped the budget will help prepare Albertans from what he described as “the whimsy of economic forces.” 

Unlike Budget 2024, where the government postponed tax cuts and made a $367 million surplus a virtue, Budget 2025 prioritizes tax cuts ahead of book balancing. 

The government’s fiscal framework includes allowable exceptions for when the government can run a deficit, including when there is a significant drop in revenue. 

Here is what you need to know about Budget 2025:  

The fiscal fundamentals: 

Despite the economic uncertainty and the looming tariff threat, the budget projects the Heritage Fund’s growth to $250 billion by 2050 and is expected to grow to about $27 billion by the end of the fiscal year.  

The government is forecasting that debt servicing costs will decrease by $231 million in 2025-26 from the 2024-25 forecast, to $3 billion, as funds pre-borrowed in 2024-25 will be used to repay sizeable debt maturities coming due in early 2025-26.  

Despite the somber tone in 2025, Horner remains bullish about Alberta’s economic future.  

Making good on the UCP’s income tax cut campaign commitment  

The Budget included the income tax cut which was anticipated to be included in the previous provincial budget. With its inclusion in the 2025-26 Budget, the UCP government fulfilled its long-standing campaign commitment to cut income taxes for Albertans.   

The new eight per cent personal income tax bracket for the first $60,000 of income is starting two years ahead of the previously proposed timeline. The government is projecting that the tax cut will save Albertan families up to $1,500 in 2025. However, the tax cut will cost the government $1.2 billion in the 2025-26 fiscal year. This is projected to be the largest tax break since the days of former premier Ralph Klein.  

Historically, income tax reductions at the lower brackets have been the easiest way for the provincial government to provide broad-based relief to Alberta taxpayers without being exclusionary.  

Health and Education  
With a booming population, this year’s budget invests more in health care and education. Some key investments include: 

• $28 billion in operating expenses, an increase of $1.4 billion or 5.4 per cent, across the refocused health care system. 

• $1.7 billion for implementing the compassionate intervention framework and Recovery Alberta Services. 

• $3.8 billion to focus on making the full continuum of care available to all Albertans, from assisted living, home care and community care, to housing and social supports with wraparound social services. 

Education receives its highest-ever operating budget with an allocation of $9.9 billion aimed at recruiting thousands more teachers and staff with the goal of lowering class sizes. 

Impact of tariff threat on oil prices and Alberta’s response  

To prepare for natural disasters such wildfires and floods and the threat of tariffs from US President Donald Trump, Horner also built in a $4 billion-dollar contingency fund to prepare for the moving target of economic headwinds “if they come next month, next week or a year from now.” 

The government is forecasting the price of Western Canadian Select (WCS) at an average of $73.10 CAD per barrel and has pegged WTI at $68 per barrel – a differential of $17.10.  

However, making any oil pricing projections with any degree of certainty has always been challenging for successive Alberta governments, made even more difficult this year by the prospect of Trump’s tariffs.  

Budget 2025: A balancing act 

The budget ultimately reflects the balancing act between fiscal responsibility and political commitments. The $5.2 billion deficit signals a shift away from previous surplus-driven narratives, prioritizing tax relief and economic stability. While the income tax cuts fulfill a key UCP campaign promise, the $1.2 billion cost underscores the trade-offs inherent in the government’s approach—offering short-term affordability relief at the expense of revenue stability. 

At its core, this budget represents a calculated gamble: that tax cuts will stimulate economic activity, that investments in healthcare and education will offset the pressures of record population growth, and that Alberta’s economic resilience will weather geopolitical and environmental uncertainties. Whether this approach will succeed or exacerbate fiscal vulnerabilities will depend on the province’s ability to navigate both the predictable and unpredictable challenges ahead. 

Another notable area of focus is streamlining regulatory barriers. In the budget address, it was highlighted that Alberta has the least number of interprovincial trade barriers in Canada. Reducing trade barriers and red tape continues to be a priority for this government. This presents an opportunity to work with the Alberta government on removing any red tape challenges for your organization. 

To learn more about what this means for your sector, business, or association, please reach out directly to the Counsel Public Affairs Alberta team: