Budget 2025: What It Means for Transportation

Sector Impact Summary

Transportation is the undisputed winner in Budget 2025's capital allocation, receiving the largest ministry capital plan at $8,475 million over three years. The Ministry of Transportation and Economic Corridors manages a comprehensive program spanning highways, bridges, urban transit, water infrastructure, and municipal transportation support. The three-year allocation of $2,718 million in 2025-26, $2,850 million in 2026-27, and $2,908 million in 2027-28 shows a growing investment profile that reflects the government's commitment to infrastructure as an economic priority.

The headline investment is the $2,863 million allocated to Edmonton and Calgary LRT projects over three years, representing the single largest capital line item in the entire provincial budget. This urban transit transformation, combining provincial and federal funding, will reshape mobility in Alberta's two largest cities. Beyond LRT, the budget invests heavily in highway network capacity, rehabilitation, and safety improvements. The $1,067 million highway rehabilitation program, $485 million Deerfoot Trail upgrade in Calgary, $385 million bridge construction program, and numerous highway twinning projects address Alberta's extensive 64,000-lane-kilometre highway network.

Total ministry expense is $2,792 million in 2025-26, slightly down from $2,830 million in the prior year, with the decrease driven by LRT capital grant re-profiling partly offset by increased operating expense. The operating budget rises to $580 million, up $28 million, including a $24 million increase for highway maintenance. The primary risk to this sector is tariff-driven construction cost inflation, particularly from 25% tariffs on steel and aluminum, which could erode the purchasing power of these substantial capital allocations.

Key Budget Measures

Transportation and Economic Corridors capital plan: $8,475 million over three years ($2,718M, $2,850M, $2,908M). The largest ministry capital allocation in the budget. (Source: Capital Plan Details by Ministry 2025-28)

Edmonton and Calgary LRT: $2,863 million over three years ($772M, $1,095M, $996M). Includes both provincial and federal funding for light rail transit expansion in Alberta's two major cities. Also includes $5 million towards the design of the Blue Line Connector to Calgary International Airport. (Source: Capital Plan Details by Ministry 2025-28)

Highway Rehabilitation Projects: $1,067 million over three years ($369M, $336M, $362M). Addressing maintenance and rehabilitation needs across the provincial highway network. (Source: Capital Plan Details by Ministry 2025-28)

Deerfoot Trail Upgrades (Calgary): $485 million over three years ($197M, $139M, $149M). Major capacity improvements to Calgary's busiest highway corridor. (Source: Capital Plan Details by Ministry 2025-28)

Bridge Construction Projects: $385 million over three years ($125M, $130M, $130M). New and replacement bridges across the province. (Source: Capital Plan Details by Ministry 2025-28)

New highway twinning, widening, and expansion: $264 million in new funding over three years. Includes Highway 11 twinning from Red Deer to Rocky Mountain House ($208 million), Highway 3 twinning from Taber to Burdett ($106 million), Highway 63 north of Fort McMurray ($101 million), and numerous other projects. (Source: Fiscal Plan 2025-28, Capital Plan, p.98)

Highway maintenance increase: $24 million. Operating expense increase for provincial highway maintenance in 2025-26. (Source: Fiscal Plan 2025-28, Expense, p.90)

Funding Changes

Item	2024-25 Forecast	2025-26 Estimate	Change
Transportation total expense	$2,830M	$2,792M	-$38M
Operating expense	$552M	$580M	+$28M
Capital grants	$1,247M	$1,151M	-$96M
Edmonton/Calgary LRT (Yr 1)	N/A	$772M	Re-profiled

(Source: Fiscal Plan 2025-28, Expense, p.90)

Capital Investment

Major capital projects within the $8,475 million three-year plan:

Urban Transit:

• Edmonton and Calgary LRT: $2,863M ($772M, $1,095M, $996M)
• Terwillegar Expansion: $84M ($54M, $16M, $14M)
• Yellowhead Trail: $106M ($51M, $55M)
• Ray Gibbon Drive Upgrade: $32M ($25M, $6M, $1M)
• STIP municipal transportation: $127M ($33M, $39M, $55M)

Highways and Bridges:

• Highway Rehabilitation: $1,067M ($369M, $336M, $362M)
• Deerfoot Trail Upgrades: $485M ($197M, $139M, $149M)
• Bridge Construction: $385M ($125M, $130M, $130M)
• Highway 11 Twinning: $208M ($50M, $62M, $96M)
• Highway 881 improvements: $141M ($45M, $51M, $44M)
• Highway 60 Capital Improvements: $128M ($31M, $34M, $63M)
• Highway 3 Twinning: $106M ($91M, $15M)
• Highway 63 Twinning: $101M ($35M, $25M, $41M)
• Ring Roads (Edmonton and Calgary): $100M ($20M, $65M, $15M)
• P3 Ring Road Rehabilitation: $99M ($47M, $23M, $29M)
• Vinca Bridge Replacement: $98M ($9M, $21M, $68M)
• Highway 2 Balzac Interchange: $92M ($1M, $40M, $51M)
• La Crete Bridge: $87M ($4M, $27M, $55M)

Water Infrastructure:

• Regional Water/Wastewater - Water for Life: $257M ($51M, $111M, $95M)
• Municipal Water and Wastewater Program: $195M ($45M, $67M, $84M)
• Water Management Infrastructure: $164M ($59M, $65M, $40M)
• Springbank Off-Stream Reservoir (SR1): $62M ($42M, $20M)
• First Nations Water Tie-In: $50M ($8M, $15M, $27M)

Other:

• Calgary River District and Event Centre: $173M ($82M, $66M, $24M)
• Major Maintenance: $135M ($45M, $45M, $45M)
• Airport Gateway Strategy: $4M increase in 2025-26 operating

(Source: Capital Plan Details by Ministry 2025-28)

Risks

Construction cost inflation from tariffs. U.S. tariffs, including 25% on steel and aluminum, and Canadian retaliatory measures will increase costs of construction materials. This could significantly reduce the real purchasing power of the $8.5 billion capital allocation, meaning fewer kilometers of highway, fewer bridges, and potentially delayed LRT timelines.

LRT project cost and schedule risks. The Edmonton and Calgary LRT projects represent $2.9 billion in complex urban construction subject to cost escalation, schedule delays, geotechnical challenges, and labor market pressures.

Revenue volatility affecting future commitments. With a $5.2 billion deficit in 2025-26, sustained capital spending at this level depends on revenue recovery. The three-year targets for 2026-27 and 2027-28 could face pressure if fiscal conditions worsen.

Labour availability for construction. The sheer scale of the capital program, combined with other major industrial projects (Dow Path2Zero, health facilities, schools), will create intense competition for skilled construction workers.

Opportunities

Largest-ever transportation capital program. The $8.5 billion allocation represents a generational investment in Alberta's transportation infrastructure, creating thousands of construction jobs and improving economic connectivity across the province.

Highway network expansion supporting economic corridors. New highway twinning and expansion funding directly supports trade corridors connecting oil sands regions, agricultural areas, southern Alberta trade routes, and Indigenous communities to markets.

Urban transit transformation. The $2.9 billion LRT investment will transform mobility in Edmonton and Calgary, potentially catalyzing transit-oriented development, reducing congestion, and improving access to employment centres.

Countercyclical stimulus. In a year of economic uncertainty from tariffs, the massive infrastructure spending program provides countercyclical economic support, sustaining employment and economic activity in the construction sector.

What's Missing

The budget does not include specific measures to mitigate the tariff impact on construction material costs, such as domestic sourcing requirements or material cost contingencies. There is no dedicated electric vehicle charging infrastructure program within the transportation capital plan. The budget lacks a freight strategy or specific investments in goods movement infrastructure beyond highway improvements. Rail transportation receives no mention despite its importance to trade corridors. There is no carbon reduction target or strategy for the provincial highway network's own operations.

Net Assessment

Transportation receives the strongest capital commitment in Budget 2025, with $8.5 billion positioning the sector as the government's primary vehicle for economic infrastructure investment. The comprehensive program spanning LRT, highways, bridges, and water infrastructure reflects both growth management and economic stimulus priorities. The principal risk is that tariff-driven construction cost inflation, particularly from 25% steel and aluminum tariffs, could reduce the real output of these allocations significantly.