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Briefing Note: Analysis of the 2025 Alberta Budget

Briefing Note: Analysis of the 2025 Alberta Budget
Date: February 28, 2025
 
Introduction
Alberta Minister of Finance Nate Horner tabled the province’s 2025 budget on Thursday, February 27, 2025. This year’s budget, titled Meeting the Challenge presents a multifaceted fiscal plan amidst economic uncertainties, notably potential U.S. tariffs and fluctuating oil revenues.
 
This briefing examines the budget's specific benefits and risks to Red Deer's business sector and municipal funding, highlighting key infrastructure and operational investments pertinent to our region.
 
Overview
Facing geopolitical uncertainties, potential U.S. tariffs, and revenue shortfalls, Budget 2025 projects deficits of $5.2 billion in 2025/26, $2.4 billion in 2026/27, and $2 billion in 2027/28. This marks a departure from four consecutive years of surpluses.
 
The projections are based on an assumed average 15% tariff on all goods exported to the United States, excluding energy products, which are expected to face a 10% tariff. These rates are lower than the 25% tariff threatened by President Trump. The government estimates that if the higher 25% tariffs are imposed, the deficit could increase to $8.7 billion in 2025/26, with subsequent years also seeing significant increases. Additionally, the budget includes a substantial tax cut to fulfill a campaign promise, further impacting the fiscal outlook.
 
Economic growth is expected to decline to 1.8% in 2025 and 1.7% in 2026, down from 3% in 2024. West Texas Intermediate (WTI), a key oil benchmark influencing Alberta’s government projections, is forecast to be $68.00 per barrel in 2025–26. The province also anticipates producing 519,000 barrels of conventional crude per day.
Additionally, population growth is expected to slow to 2.5% in 2025, down from 4.4% in 2024.
 
Budget by the Numbers

  • $79.3 billion in total spending – up $4.4 billion since Budget 2024 
  • $5.2 billion deficit, with deficits also projected the next two fiscal years 
  • $1.2 billion to implement the tax cut  
  • $28 billion in operating funding for the healthcare system, up 5.4% since Budget 2024 
  • $26.1 billion over 3 years in the 2025 Capital Plan – an increase of 4% 
  • 8.7% estimated debt-to-GDP ratio.
  • 16.4% spending-to-GDP ratio.
Specific Benefits to Red Deer and District
  1. Infrastructure Investments:
  • Allocation of $50 million for the twinning of Highway 11 from Red Deer to Rocky Mountain House is expected to enhance transportation efficiency, facilitating smoother logistics for businesses.
  • Investment of $4 million in the Red Deer Regional Airport expansion project is anticipated to improve regional connectivity, offering businesses greater access to markets and resources.
  • The budget allocates $129 million for the Red Deer Regional Hospital Centre redevelopment and an additional $9 million for its interim cardiac catheterization lab, enhancing local healthcare services.
  • A province-wide commitment of $7.5 billion for municipal infrastructure support over the fiscal year may provide opportunities for Red Deer to access funds for local projects, improving community services and facilities.
 
Notably absent were commitments to Red Deer Polytechnic and Westerner Park.
 
Tax highlights
No new corporate tax measures were announced. Personal and other tax measures in the budget include:
  • Introduction of the new eight percent personal income tax bracket for income up to $60,000, effective January 1, 2025; two years ahead of the schedule announced in Budget 2024. Source deductions will be updated after July 1, 2025.
  • For Albertans that would have more than $60,000 of non-refundable tax credits, there will be a new tax credit introduced to ensure they will also realize the two percent tax reduction on the first $60,000 of income.
  • Increase to the education property tax rates in 2025-2026 (after being frozen in 2024-2025), from $2.56 to $2.72 per $1,000 of equalized assessment for residential and farmland properties, and from $3.76 to $4.00 per $1,000 for non-residential properties.
  • Increase to the fuel tax rate that applies to locomotive fuel from 5.5 to 6.5 cents per litre effective March 1, 2025.
  • Winding down of the entitlements to the previously eliminated Alberta Climate Leadership Adjustment Rebate and the Alberta Family Employment Tax Credit after December 31, 2025. Late-filed returns and reassessment will no longer be accommodated after this date.
 
Good News for Municipalities
All Alberta municipalities will receive $820 million this year to advance local priorities, for an increase of just over 13 per cent from last year.
 
Property tax payments have been a point of contention in Red Deer and many other Alberta municipalities, since Grants in Place of Taxes was reduced by 50 per cent between 2019 and 2020. The 2025 Budget states that Alberta will be increasing the grants by $17.2 million this fiscal year, which will bring funding up to 75 per cent of eligible property taxes on provincially owned buildings. The grant is set to increase to 100 per cent in 2026. The increased grant funding for property tax should be used to lower property taxes for Red Deer homeowners.
 
Healthcare
Healthcare is the biggest winner in Budget 2025, with $1.4 billion in new spending amid ongoing healthcare system transformations. The operating budget funding includes $4.6 billion for acute care, $1.7 billion for addiction and mental health services, $3.8 billion for Assisted Living Alberta, the province’s new continuing care agency, and $644 million for primary care to improve access to family doctors and primary healthcare professionals, along with $45 million allocated for Indigenous health initiatives over the next three years, and $7 billion for physician compensation and development. 
 
Education
K-12 education is receiving $9.9 billion in operating funding, a 4.5% increase from last year’s third-quarter forecast. This includes $54 million to support enrollment growth, $1.6 billion for students with specialized learning needs, and $55 million to add staff and other resources to complex classrooms. An additional $1.1 billion has been allocated over the next three years to hire 4,000 additional teachers and classroom support staff. 
Budget 2025 features investments in post-secondary capital projects, but base operating grants provided to public post-secondary institutions (PSI) remain the same as in 2024–25.
 
The projected 2025–26 operating expense for advanced education is $6.6 billion. While this is a 5.2 per cent increase from the $6.3 billion operating expense allocated for 2024-25 in Budget 2024, PSIs are expected to cover 58 per cent of the operating expense — a five per cent increase from 2022–23. This means that PSIs will cover $3.8 billion of the total projected operating expense. Budget 2024 projected that PSIs will cover 58 per cent of the operating expense in 2026–27, not 2025–26.
 
Capital
Alberta’s Capital Plan received a $1.1 billion boost, with $26.1 billion allocated over the next three years. The plan includes $2.6 billion for K-12 educational infrastructure, $1.1 billion for housing and social supports, $2.5 billion for road and bridge infrastructure, and $3.6 billion for healthcare infrastructure.
 
Additionally, $7.5 billion has been set aside to support municipal infrastructure, and $25 million has been allocated for police equipment and border patrol facilities as part of the province’s border security initiative. The Capital Plan for Budget 2025 allocates $528 million over three years toward improving post-secondary education facilities. 
 
Conclusion
The 2025 Alberta Budget introduces measures that could stimulate economic activity and infrastructure development in Red Deer, however, significant investments not made present several critical concerns for Red Deer's economic and educational sectors:
 
1. Insufficient Funding for Westerner Park
  • Despite Westerner Park's significant role as a regional economic driver, the 2025 Alberta Budget does not allocate specific funding to this major agricultural and event centre.
  • The budget includes $14 million annually for operating and capital funding to assist agricultural societies. However, the absence of targeted financial support for Westerner Park, relative to its size and economic impact, suggests a funding imbalance when compared to smaller agricultural societies. This omission is notable, especially considering that in July 2024, local entities—including the City of Red Deer, Red Deer County, the Donald family, and the Westerner Park Foundation—collectively contributed $2 million to support its operations during a provincial review of agricultural societies.
 
2. Underinvestment in Red Deer Polytechnic Amid Federal Policy Changes
  • Red Deer Polytechnic (RDP) anticipates a $10 million deficit for the 2025/2026 fiscal year. This financial strain is attributed to stagnant base grant funding from the provincial government, rising inflation, and significant impacts from the federal government's decision to reduce international student permits by 10% in 2025. This followed a cap introduced in 2024, which has directly affected RDP's revenue. International students, who pay higher tuition fees, are a vital income source for the institution.
  • In response to the deficit, RDP has announced the suspension of five programs and plans to reduce staff by approximately 35 to 40 positions across various employee groups.
  • The provincial budget's failure to compensate for this shortfall exacerbates the financial challenges faced by RDP, not only affecting the institution's offerings but also has broader implications for the local economy.
 
In summary, the 2025 Alberta Budget's lack of targeted support for key regional institutions like Westerner Park and Red Deer Polytechnic poses significant risks to the economic vitality and educational landscape of Red Deer. Addressing these funding disparities is crucial to sustaining the growth and development of the region.
 
The Red Deer District Chamber will continue to engage with provincial authorities to address these concerns and capitalize on opportunities for regional growth.
 
While we applaud the Provincial Government’s commitments in Budget 2025 to begin to again pay more of its fair share of property taxes, lessening the burden on municipal property owners, and it’s investments in social support programs and public safety initiatives, the education tax requisition and lack of tariff-proofing the province keeps us cautious in our optimism.
 
 
 
 
 
 

Briefing Note: Analysis of the 2025 A...