Alberta runs budget deficit while cutting $1.2B in taxes amid U.S. tariff threat

Officials said taxpayers will start to see the impact of the cut on their paycheques after July 1, when payroll withholdings are adjusted.

At the same time, the ruling United Conservatives will this year run a $5.2 billion deficit that it blames on falling oil revenues, the tax cut and the tariff threat.

It plans to cut that deficit to $2.4 billion next year and $2 billion in 2027, following its own fiscal framework rules that say Alberta can only run a deficit for three consecutive years.

Finance Minister Nate Horner, asked how he can reconcile funding a tax break while running in the red, said it’s a crucial way to help Alberta taxpayers.

“Balanced budgets mean a lot to me,” Horner told reporters on Thursday.

“I don’t want to put Alberta in a position long term where this tax cut is going to make a path back even harder,” he added.

“But due to the uncertainty, due to the affordability concerns that we’re seeing, it seemed like the right time and I fully endorse it.”

Horner added tariffs threatened by U.S. President Donald Trump could bring a $6-billion swing in the deficit depending on what is levied and how much.

The budget sets aside $3.6 billion over three years for provincial health care programs and infrastructure to increase access. One billion dollars of that will be spent on capital projects this year.

Alberta NDP Leader Naheed Nenshi said he was “absolutely shocked” by the turnaround from a surplus to a deficit, and said the government’s plan shows an unprecedented level of fiscal irresponsibility.

“Deficits are nothing but deferred taxation. They’ve got to get paid back,” he said.

He added that the tax cut, even at its maximum, won’t adequately address the province’s high inflation rate, auto insurance rates or utility costs.

“But at least you’ll have an extra two bucks today to deal with it,” he said sarcastically. And, he pointed to the lack of details around the province’s response to potential tariffs.

“There’s no plan whatsoever in here to deal with the very real threat of tariffs, not just on energy, but on agricultural products and everything else that we produce here in Alberta,” he said.

While there are no new taxes, some existing taxes and fees are going up, including the education property tax billed through municipalities, fuel taxes for trains, and licence application fees for security guards and private investigators.

The NDP said the budget includes some 38 fee or tax increases that will cost millions this year.

Cash for health care, transportation

The Alberta government has budgeted $129 million for the Red Deer Regional Hospital Centre redevelopment. There is also $9 million alloted for the hospital’s interim cardiac catheterization lab.

The government has set aside $5 million of health care capital funding to “enhance ICU capacity” in both Medicine Hat and Lethbridge. It’s the only mention of Medicine Hat in the government’s fiscal plan.

Some of that cash will also go to setting up a catheterization lab at Lethbridge’s Chinook Regional Hospital.The University of Lethbridge will receive $5 million for its rural medical school project as part of a $39 million three-year target.

The province continues to pour cash into adding two lanes to highways across Alberta.

It will spend $50 million this year on twinning Highway 11 from Red Deer to Rocky Mountain House. The province will invest $4 million into the Highway 40 twinning project south of Grande Prairie.

There’s also $91 million set aside for Highway 3 between Taber and Burdett, a crucial transportation corridor between Medicine Hat and Lethbridge.

Four million dollars was earmarked in the budget for the Red Deer Regional Airport expansion project this year. The Red Deer Justice Centre will receive $2 million.

A court initiative that aims to improve the court experience and outcomes for Albertans going through separation and divorce is expanding to Grande Prairie.

A $12 million increase to the Court and Services operating expense will fund the Family Justice Strategy’s expansion to Grande Prairie. Northwestern Polytechnic will get $1 million for a skilled trades expansion.

Revenue is about $6 million less than projected in the last budget for a total $74.1 billion. Expenses are higher than projected at $79.3 billion, causing the budget deficit.

‘A blueprint to starve health care’

The Alberta Union of Provincial Employees said the budget released Thursday fails to provide adequate funding for vital public services, impacting staff and the Albertans who rely on services the most.

The 2025 budget underfunds public services by almost $1 billion in 2025-26 alone and more than $3 billion between 2024 and 2027, according to AUPE.

“Budget 2025 and the government’s three-year fiscal plan is a blueprint to starve health care, education, and public service workers into submission,” said the union’s vice president Sandra Azocar.

Azocar said the fiscal document shows the 82,000 AUPE members currently negotiating new collective agreements that the government is unwilling to offer a fair deal at the bargaining table.

Chris Galloway, executive director of Friends of Medicare, said his advocacy organization was watching for key investments in public health care including prioritizing action on health care capacity and workforce planning for a growing province.

“Unfortunately for Albertans, that’s not what we saw in today’s budget,” said Galloway.

“Instead, Budget 2025 continues to roll out the government’s expensive and chaotic restructuring of public health care in Alberta, while doubling-down on their failing privatization schemes.”

Galloway also cited the labour shortage plaguing health care in Alberta that former Alberta Medical Association president and Medicine Hat physician Dr. Paul Parks warned last year could lead to unnecessary deaths across Alberta.

Income tax break is ‘great news’

The Canadian Taxpayers Federation’s Alberta director Kris Sims praised the Alberta government income tax cut, calling it “great news” for working families.

“Families are fighting to afford basics right now, and if they can save more than $1,500 per year thanks to this big tax cut, that would cover a month’s rent or more than a month’s worth of groceries,” Sims said.

But Sims also criticized the Alberta government’s plan to run deficits for the next three years.

“If the government had frozen spending at last year’s budget level, the province could have a $1 billion surplus and still cut the income tax,” Sims argued.

“The debt is going up over the next few years, but we caught a lucky break with interest rates dropping this past year, so we aren’t paying as much in interest payments on the debt.”

— With files from The Canadian Press

by Eli J. Ridder