Alberta Budget 2025: Overview and Key Takeaways
Alberta Budget 2025 projects a $5.2 billion deficit as oil revenue drops $4B and the province braces for U.S. tariffs. Full overview of revenue, spending, and key measures.
Budget 2025 at a Glance
Alberta's Budget 2025 delivers a sharp fiscal reversal. After a $5.8 billion surplus in 2024-25, the province projects a $5.2 billion deficit in 2025-26 — the first of three consecutive deficit years. Total revenue falls $6.6 billion to $74.1 billion while total expense rises $4.4 billion to $79.3 billion (Fiscal Plan 2025-28, p.17).
The driving forces: softer oil prices, a weaker Canadian dollar, the cost of a new personal income tax cut, and the economic drag of assumed U.S. tariffs. Budget 2025 assumes Canada will face 15 per cent tariffs on all goods, with energy products facing a 10 per cent tariff (Fiscal Plan, p.10).
Despite the headwinds, the government maintains its commitment to spending discipline, keeping operating expense growth below population growth plus inflation. The $26.1 billion three-year Capital Plan represents a $1.1 billion increase over Budget 2024, with major investments in schools, health facilities, roads, and municipal infrastructure.
Revenue: A $6.6 Billion Drop
Total revenue is forecast at $74,138 million in 2025-26, down from the 2024-25 third quarter forecast of $80,692 million (Fiscal Plan, p.17).
| Revenue Category | 2024-25 Forecast | 2025-26 Estimate | Change |
|---|---|---|---|
| Bitumen Royalties | $16,859M | $12,830M | -$4,029M |
| Personal Income Tax | $16,120M | $15,510M | -$610M |
| Corporate Income Tax | $7,351M | $6,764M | -$587M |
| Investment Income | $5,171M | $2,882M | -$2,289M |
| Federal Transfers | $12,958M | $13,287M | +$329M |
| Other Taxes | $5,995M | $6,563M | +$568M |
| Other Resource Revenue | $4,650M | $4,237M | -$413M |
The largest single decline is bitumen royalties, falling $4 billion (23.9 per cent) as WTI oil is forecast at US$68/bbl in 2025-26, down from US$74 in 2024-25. The light-heavy differential is expected to widen to US$17.10/bbl (Fiscal Plan, Economic Outlook, p.21).
Investment income drops $2.3 billion — the second-largest decline — reflecting lower expected returns on the Heritage Fund and other financial assets.
The new 8 per cent personal income tax bracket on the first $60,000 of income, effective January 1, 2025, reduces personal income tax revenue by approximately $1.2 billion annually (Fiscal Plan, p.8). This saves individual Albertans up to $750 per year, with those earning under $60,000 seeing a 20 per cent reduction in provincial income taxes.
Expenditure: $79.3 Billion
Total expense is estimated at $79,349 million, up $4,417 million from the 2024-25 forecast (Fiscal Plan, p.17).
| Expense Category | 2024-25 Forecast | 2025-26 Estimate | Change |
|---|---|---|---|
| Operating Expense | $62,098M | $64,311M | +$2,213M (+3.6%) |
| Capital Grants | $3,294M | $3,452M | +$158M |
| Amortization | $4,688M | $4,993M | +$305M |
| Debt Servicing | $3,199M | $2,968M | -$231M |
| Contingency | $2,017M | $4,000M | +$1,983M |
The contingency doubles to $4 billion — a notable signal of the government's concern about economic uncertainty. This allocation is intended to address unforeseen implications of tariffs, compensation pressures from collective bargaining, disasters, and emergencies (Fiscal Plan, p.11).
Key Ministry Spending
The five largest ministries by consolidated operating expense in 2025-26:
| Ministry | 2025-26 Operating | Share |
|---|---|---|
| Health | $22,096M | 34.4% |
| Seniors, Community and Social Services | $10,016M | 15.6% |
| Education | $9,883M | 15.4% |
| Advanced Education | $6,635M | 10.3% |
| Jobs, Economy and Trade | $2,305M | 3.6% |
Health remains the largest spending ministry at $24,037 million total expense, including $22,096 million in operating expense, $1,608 million in inventory consumption, and $333 million in amortization. The health system refocus continues with four new provincial health agencies: Recovery Alberta, Primary Care Alberta, Acute Care Alberta, and Assisted Living Alberta (Fiscal Plan, Expense, p.71-73).
Education operating expense rises 4.5 per cent to $9,883 million, with $814 million in enrolment growth support over three years. A revised funding formula for school authorities will be more responsive to high-growth boards (Fiscal Plan, p.75).
Seniors, Community and Social Services grows $833 million to $10,603 million total, driven by population growth pressures on social programs, a short-term bump for potential tariff impacts, and rising capital grants for housing (Fiscal Plan, p.79).
Capital Plan: $26.1 Billion Over Three Years
The three-year Capital Plan totals $26,147 million, with $8,639 million in 2025-26 alone (Capital Plan Details by Ministry).
Major allocations:
- Transportation and Economic Corridors: $8,475M (roads, bridges, highway safety)
- Infrastructure (health and school facilities): $3,444M
- Municipal Affairs: $3,429M (MSI, LGFF, water/wastewater)
- Education: $3,288M (school construction, SCAP, maintenance)
- Seniors, Community and Social Services: $1,935M (affordable housing)
- Advanced Education: $1,529M (post-secondary facilities)
- Health: $1,456M (diagnostic imaging, EMS, equipment)
Notable projects include $2.6 billion for new and ongoing school projects, $3.6 billion for health facilities including mental health and continuing care, and $7.5 billion for municipal infrastructure support (Fiscal Plan, p.12).
Economic Assumptions and Tariff Scenario
Budget 2025 takes a cautious approach with key economic assumptions (Fiscal Plan, Economic Outlook, p.21):
| Assumption | 2024-25 | 2025-26 |
|---|---|---|
| WTI Oil Price | US$74.00/bbl | US$68.00/bbl |
| Light-Heavy Differential | US$13.20/bbl | US$17.10/bbl |
| Natural Gas | $1.20/GJ | $2.50/GJ |
| Exchange Rate | 71.7 US¢/CAD | 69.6 US¢/CAD |
| Real GDP Growth | 3.0% | 1.8% |
| Population Growth | 4.4% | 2.5% |
| Unemployment Rate | 7.0% | 7.4% |
| CPI Inflation | 2.9% | 2.6% |
The tariff baseline assumes 15 per cent tariffs on all Canadian goods except energy products (10 per cent), with Canadian retaliation on a broad range of consumer goods. This is expected to shave roughly 1.2 percentage points off real GDP growth (Fiscal Plan, p.10).
Revenue sensitivities are substantial: a $1/bbl drop in WTI reduces revenue by $750 million, and a 1 cent strengthening of the Canadian dollar reduces revenue by $560 million (Fiscal Plan, Revenue, p.63).
Key Policy Measures
- New 8% income tax bracket on first $60,000 of income, saving up to $750/person, effective January 1, 2025 — two years ahead of schedule
- Health system refocus with four integrated provincial health agencies
- Border security with new Alberta Sheriffs Interdiction Patrol Team
- Compassionate Intervention Act for mandated addiction treatment orders
- Revised school funding formula based on two-year enrolment data
- Affordable housing expansion with $767 million over three years through ASHC
- Alberta Disability Assistance Program launching 2026 to replace portions of AISH
- Fiscal framework amendments adjusting surplus cash allocation rules
Debt and Fiscal Position
The province's fiscal position weakens notably:
- Taxpayer-supported debt: $82.8 billion in 2025-26, rising to $98.4 billion by 2027-28
- Net financial debt: $43.0 billion, up from $36.6 billion
- Net debt-to-GDP: 8.7 per cent, rising to 9.3 per cent by 2027-28
- Heritage Fund: $24.4 billion year-end balance
After allocating $2 billion in 2024-25 surplus cash ($1 billion to Heritage Fund, $1 billion to the Alberta Fund), there is no surplus cash forecast for the plan period. Additional borrowing will be required (Fiscal Plan, p.17).
Net Assessment
Budget 2025 is a transitional budget marking the end of Alberta's post-pandemic surplus era. The combination of softer oil prices, deliberate tax cuts, assumed tariff impacts, and sustained spending growth produces three consecutive deficits. The government frames this as prudent fiscal management within its fiscal framework, which permits deficits when revenue drops significantly and requires a return to balance within three years.
The fiscal risk profile is elevated. Revenue is highly sensitive to oil prices and exchange rates, and the tariff assumptions could prove either too aggressive or too conservative depending on how U.S.-Canada trade relations evolve. The doubling of the contingency to $4 billion signals the government's own concern about the uncertainty ahead.
For Albertans, the immediate benefits are tangible: lower income taxes and continued investment in health, education, and infrastructure. The longer-term question is whether the province can return to balance by 2027-28 as projected, or whether structural spending growth will outpace revenue recovery.
Evidence basis: All figures sourced from the Fiscal Plan 2025-28, Government Estimates of Supply 2025-26, and Capital Plan Details by Ministry 2025-28, published February 27, 2025.