Yesterday the Alberta Government released its 2025 Budget.
Summary/Political Context
Nate Horner tabled his second budget as Finance Minister and unlike last year’s budget which had a $367 million surplus, this budget includes a $5.2 billion deficit. It is another budget that focuses on restraint which paradoxically comes with a tax cut and increased spending in health care and education. According to the Minister: “Budget 2025 is a budget of tough but measured choices that meets the needs of Albertans and maintains our Alberta advantage.” The budget also recognizes the potential Canada-U.S. trade conflict whereby Alberta fuel products could be saddled with a 10% tariff.
Themes
Health Care
Health care continues to be the largest expense (approximately 39 billion dollars) – some of the big-ticket items are:
• Physician compensation, development, recruitment and retention ($7 billion).
• Primary and acute care ($5.2 billion).
• Assisted living ($3.8 billion).
• Infrastructure and increased capacity for providing services ($3.6 billion).
• Drugs and supplemental benefits ($1.9 billion).
• Addiction and mental health ($1.7 billion).
• Indigenous health initiatives ($45 million).
Education
In recognition of Alberta’s recent population growth, the province has increased its operating expense budget for K-12 by 4.5% ($9.9 billion in total). There are 2 major areas of investment: approximately 4,000 teachers and support staff will be hired over the next 3 years ($1.1 billion), while $1.6. billion will be provided in 2025-26 for students with specialized learning needs.
Funding for post-secondary education was also increased by $77 million. The focus is on increasing seats in high demand programs and aligning programs with employment opportunities.
Taxes
In light of the fiscal challenges facing the province and the potential for a trade war with the U.S., the province has implemented a promised tax cut earlier than expected. Personal income tax on the first $60,000 of income will be 8% down from 10%, will establish an 8% personal income tax for income up to $60,000.
Fiscal Projections/Economic Outlook
The province plans to spend $79.3 billion this fiscal year – a 5.9% increase from last year. Total revenue is expected to be $74.1 billion, a significant decrease when compared to last year’s revenues of $80.7 billion. It is estimated that resource revenues will still contribute approximately 25% of Alberta’s overall income.
Projected revenue is based on the government’s forecast of West Texas Intermediate crude at $68 USD a barrel (the current price is $71 USD a barrel). However, each dollar drop in the price of oil accounts for a $600 million decrease in revenues. The government intends for The Heritage Savings Trust Fund to help Alberta reduce its reliance on natural resource revenues in the long term. The Fund is expected to grow from $25 billion to $27 billion by the end of the fiscal year, with the goal of it reaching $250 billion within the next 25 years.
The provincial debt is now more than $85 billion and the servicing costs forecasted for debt in 2025-26 are $3 billion.
The pie chart below provides perspective on the size of each provincial government department based on expenses and on where tax dollars go. This chart does not include capital investments or financial transaction costs. Note: Child Care is not its own department, but it represents most of the spending by Jobs, Economy, and Trade (JET). The remainder of JET is accounted for under “Other 19 ministries combined”.
