The government has just tabled its budget in the Legislature.

We were invited to the government’s advance briefing, which gave us a few hours to review the documents, ask questions, and analyze the numbers before the official release.

Now that the embargo has been lifted, we can share our thoughts with you.

However, this is just our preliminary analysis – we’ll have a more in-depth breakdown for you next week.

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The 2025/26 Budget is a projection for the next year – what the government expects will happen from April 1st, 2025 to March 31st, 2026.

It represents the government’s best estimate of future revenue and its plan for expenditures.

In the budget (and in this email) this type of figure is referred to as a Budget figure.

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The actual final figures won’t be known until the 2025/26 Annual Report is released in the middle of next year.

Of course, as we’ve seen in the past, things don’t always go according to plan.

In the budget (and in this email) this type of figure is referred to as an Actual figure.

Importantly, this means that the 2024/25 Annual Report isn’t ready yet, either.

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Therefore, in the meantime, the Q3 2025/26 Fiscal Update, which has figures up to December 31st, 2024, provides a forecast for the 2024/25 year.

The government looks at the actual results three quarters of the way through the previous year, and uses those figures to get the most accurate forecast on what will be the final result in the annual report, to help with estimating the 2025-26 year.

In the budget (and in this email) this type of figure is referred to as a Forecast figure.

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Accurately estimating, and tracking these three types of figures is a key part of good budgeting.

Sometimes, the economy performs better than expected, oil prices could be higher than initially forecast, or more revenue may come in from other sources.

But, other times, there’s a recession or a drop in oil prices, leading to lower-than-expected revenue.

On the spending side, governments sometimes find savings, keeping expenses lower than planned.

Alternatively, unexpected costs, disasters, or just governments being governments can also drive spending higher than budgeted.

The best way to manage this uncertainty is:

1. Be conservative in estimating revenue.
2. Only plan to spend what is reasonably expected to come in.
3. Stick to that spending plan to avoid overspending.

By following these principles, the risk of an unexpected deficit is minimized.

And if revenue exceeds expectations or expenses come in lower, the surplus can be used to pay down debt or be returned to taxpayers.

On these three measures, this year’s budget gets a mixed grade.

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On the first point, the government has indeed made some pretty conservative estimates of revenue – including assuming an oil price several dollars below where it currently stands, and well below the previous year’s predictions.

The government has also assumed there will be some significant (though not catastrophic) effects from a potential trade war.

If oil prices end up higher, or Canada avoids a trade war with the US, then revenue could be significantly higher than planned.

Interestingly, this year’s budget looks very different depending on whether you compare it to last year’s budget, or the latest forecast.

This year’s budget revenue is $6.6 billion lower than what actually happened in last year’s forecast revenue.

But, this year’s budget revenue is actually $600 million higher than what was expected to happen in last year’s budget revenue.

In other words, if you compare this year’s budget to what the government expected to happen last year, revenue is up a small amount, but when you compare this year’s budget to what actually happened last year, revenue is down a lot.

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On the second point, unfortunately, the government doesn’t score so well.

Expenses are up quite a bit, even though revenue is expected to drop.

According to some measurements, expenditures are increasing slower than the combined rate of population growth and inflation – which is the goal the government set for itself in 2023.

But, when other expenses like contingencies for emergencies are included, or when expenses are measured in other ways, spending is increasing faster than that benchmark.

This year’s budget expenses are $4.4 billion higher than what was actually spent in last year’s forecast expenses.

But, this year’s budget expenses are $6.1 billion higher than what was expected to happen in last year’s budget expenses.

Perhaps the bigger question is why is expenditure increasing at all when revenue is expected to drop?

If there’s less money coming in, the government should really be using this as an opportunity to reduce overall expenditures.

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On the third point, we will – of course – have to wait and see what the final accounts look like next year!

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Before we wrap up this initial analysis, there’s one aspect of the budget that is likely to receive significant attention, and that is a tax cut.

Originally planned to be phased in over the next few years, a tax cut will now be back-dated to January 1st of this year.

Previously, any income below about $150,000 was subject to a 10% provincial tax, while incomes above $150,000 attract higher and higher tax rates of 12%, 13%, 14%, and 15% as incomes increase.

Under the new tax plan, incomes under $60,000 would only be taxed at 8%, with incomes between $60,000 and $150,000 still paying 10%, and incomes above $150,000 still paying 12%, 13%, 14%, and 15%, as before.

Some commentators are likely to question the wisdom of a tax cut that reduces revenue when the budget is going to be in deficit.

But, the reality is that this tax cut doesn’t actually cost much.

We’ll have the exact figures for you by next week, but suffice to say that it’s a pretty small portion of the overall deficit, and there’s a deficit because spending is up a lot, not because of a small tax cut.

In general, lower taxes are good, but we would have preferred the government work towards a lower, flatter tax instead.

The Alberta Advantage was built on Alberta’s unique flat tax system where everyone paid the same low flat tax (not the same amount, the same percentage!) and so wasn’t punished for succeeding.

Alberta needs a plan to get back to a low flat tax, and we will continue to advocate for this at the Alberta Institute.

Maybe we can do better than just returning to the old 10% flat tax, though?

Maybe we should aim for a flat tax of 8%, instead?

That’s it for today’s quick initial analysis.

In next week’s analysis, we’ll break down the pros and cons of these decisions and outline where we might have taken a different approach.

In the meantime, if you appreciate our work and want to support more of this kind of independent analysis of Alberta’s finances, please consider making a donation here:

Budget 2025 makes another record health care investment of $28 billion for a refocused health care system that ensures every Albertan has access to high-quality, reliable services close to home. The budget supports the government’s plan to provide targeted, specialized care in the four areas of acute care, primary care, mental health care and continuing care.

With the highest-ever operating budget of $9.9 billion for education from kindergarten to Grade 12, Budget 2025 will help hire thousands more teachers and support staff, lower class sizes and provide enhanced educational support to students with complex needs.

The budget invests $2.6 billion in capital dollars over three years, an increase of 23.9 per cent from the last budget. This includes $225 million to advance the planning and design of 30 new schools, five replacement schools, three modernization school projects, three public charter school projects and modular classrooms. These schools are in addition to the 22 that have been advanced to the next construction phase under the School Construction Accelerator Program, launched in fall 2024. Another 28 projects are in other stages of construction. Alberta’s government is committed to building much needed schools across the province and aims to deliver more than 100 new and updated schools – or about 200,000 student spaces – over the next seven years.

“All Albertans deserve access to the best our health care and education systems have to offer. Alberta is growing as many families choose us as home. Budget 2025 will help meet the growing demands of the province while continuing to provide the services Albertans have come to trust and rely on.”

Budget 2025: Strengthening health care

Budget 2025 supports the government’s plan to build a refocused health care system that will provide Albertans with the necessary care when and where they need it.

Health investments across the refocused health care system in Budget 2025 include:

• $644 million for primary care to attach every Albertan with a primary care team and improve access to family doctors and frontline health-care professionals. This includes $20 million to support the work of nurse practitioners.
• $4.6 billion for acute care, to support increases to services to meet volume and costs, and to improve the acute care system in hospitals, urgent care centres, chartered surgical and other health facilities.
• $45 million for Indigenous health initiatives over three years, to help address health inequities and promote health, wellness and increased choice.
• $7 billion for physician compensation and development, including $15 million for recruitment and retention.
• $1.9 million for drugs and supplemental health benefits including the seniors drug program, which is the largest component that supports more than 700,000 seniors.
• $1.7 billion to support addiction and mental health services to increase access to the supports Albertans require to pursue recovery and personal wellness. This includes implementation of the compassionate intervention framework, support for Recovery Alberta services, new recovery communities, and to expand mental health classrooms for clinical support to students with complex mental health needs.
• $3.8 billion for Assisted Living Alberta, the new provincial continuing care health agency, which will provide wraparound medical and non-medical supports, home care, community care and social services.

A total of $3.6 billion in capital dollars over three years will support new urgent care and primary care centres, build capacity at existing hospitals, expand surgical capacity, enhance rural hospitals and health facilities, and replace aging equipment to support improved health outcomes. This includes:

• $769 million to support transformational changes in continuing care, increase the number of assisted living spaces and modernize existing assisted living homes in Alberta.
• $265 million for the Alberta Surgical Initiative capital program to expand, renovate and build more operating rooms to boost surgical capacity.
• $207 million for the development of specialized compassionate intervention facilities to provide care for patients.
• $168 million in new funding to enhance diagnostic capabilities across the province.
• $148 million to continue building Recovery Communities. A total of 11 recovery communities, including five in Indigenous communities, have been approved, with the Calgary Recovery Community scheduled to open in 2025. So far, 200 new addiction treatment beds are operational in Red Deer, Lethbridge and Gunn.
• $60 million over three years to purchase new EMS vehicles and ambulances, upgrade the existing fleet and buy more equipment.

“Budget 2025 builds on our commitment to refocusing Alberta’s health care system, improving access for Albertans, and supporting frontline workers. With significant investments in primary care, capital projects, Indigenous health, and acute services, we are ensuring Albertans receive the care they need, when and where they need it.”

“Alberta is an international leader in addiction treatment and recovery, driven by the Alberta Recovery Model. We remain committed to investing in the wellness of Albertans and providing those struggling with mental illness or addiction with the services they need to rebuild their lives. We are also committed to expanding access to treatment services by building new facilities across the province.”

Budget 2025: Investing in kindergarten through Grade 12 (K-12) education

Albertans deserve world-class education for their families now and in the future. Budget 2025 provides an operating expense budget of $9.9 billion in 2025-26, a 4.5 per cent increase from the 2024-25 third-quarter forecast.

• $54 million in 2025-26, along with $348 million more over the following two years will support additional enrolment growth.
• an increase of $55 million in 2025-26, and another $94 million in each of the following two years, to adjust the funding formula for school authorities to provide increased sustainable funding for growth within the funding model.
• In total, almost $1.1 billion will be provided over the next three years to address growth and hire more than 4,000 new teachers and classroom support staff.
• More than $1.6 billion in 2025-26 will support students with specialized learning needs or groups of students who need additional help.
• An investment of $55 million in 2025-26, a 20 per cent increase from last year, will allow school authorities to add staff and supports to complex classrooms so students receive the focus and attention they need.
• $389 million over three years will provide increases to funding rates to cover the rising costs of maintaining educational facilities, unavoidable expenses like insurance and utilities, and providing programs and services to students.

“Budget 2025 offers solutions to many of the challenges our education system is experiencing. We’re making new investments to hire more teachers, build more schools and give our youngest learners the strongest possible start. I’m excited to present this strong education budget to Albertans and am confident it will help keep our education system world-class.”

As Alberta continues to attract families, workers, and businesses, strategic investments in health care and education will address current demands and lay the groundwork for long-term prosperity.

Budget 2025 is meeting the challenge faced by Alberta with continued investments in education and health, lower taxes for families and a focus on the economy.

Related information

• Budget 2025
• Alberta Recovery Model