EDMONTON — Alberta’s new budget will carry an eye-popping $9.4-billion deficit as the province, after decades of trying to get off a roller-coaster of oil revenues, seeks to manage the ride and weather the whiplash.
The deficit is the largest since the COVID-19 era, a time of global economic catastrophe that saw oil prices trade in negative numbers.
Finance Minister Nate Horner says the costs of a rising population coupled with low oil prices are hammering the province’s bottom line and stretching capacity.
But he says now isn’t the time to ratchet back spending on core services. The budget will see spending increases in health and education. There are no new major taxes but there are hikes on minor purchases, including car rentals and licence registries.
“Our balance sheet is in better condition than that of many Albertan households. So we’re going to weather this for them and keep an eye towards the future,” Horner told reporters Thursday before introducing the budget in the house.
The province projects West Texas Intermediate – the lifeblood benchmark oil price for Alberta’s economy — to average US$60.50 a barrel in the upcoming fiscal year — not nearly enough to balance the books.
Horner said if oil prices stay low indefinitely, the structural deficit will become “extremely obvious” but that he doesn’t have a mandate to tinker with the province’s tax system now.
Alberta doesn’t have a provincial sales tax and has comparatively low business and personal taxes.
Earlier this week, Horner said a five per cent provincial sales tax in an economy like Alberta’s could drive about $6 billion in revenue, but he’s not promoting a referendum on a potential PST “right now.”
“We’ve got to take Albertans with us on this ride,” he said Thursday. “If Albertans want to give up some of that advantage to get off the roller-coaster, that’s a conversation we can have.”
The deficit also breaks a threshold for going into the red legislated by Premier Danielle Smith’s United Conservatives. When asked what the consequences are for blowing past the government’s own fiscal guardrails, Horner said the consequences are “political.”
“We created these rules, and I’m breaking them. So it bothers nobody more than it does me.”
While Horner acknowledged population growth is slowing, the province still needs to “catch-up” to demands in infrastructure, including hospitals and schools.
Health-care spending is going up almost six per cent, or $1.9 billion, bringing it to $34.4 billion. Education funding is being boosted by seven per cent from the previous year, for a total of $10.8 billion.
The changes come as pressures on emergency rooms sparked stories of suffering and potentially preventable deaths, and after teachers were ordered back to work in the fall amid a rancorous strike in which they demanded action on overcrowding and complex classrooms.
Smith’s government is also aiming to grow the nest egg Alberta Heritage Savings Trust Fund to at least $250 billion by 2050, in hopes that annual investment returns will start to generate a new reliable revenue stream.
The fund is expected to grow to about $34 billion by the end of 2026-27, up from $31.5 billion from the 2025-26 second-quarter fiscal update.
This is the second deficit in a row from the UCP, after the province careened from a surplus of $8.3 billion in 2024-25.
For the fiscal year ending in March, the province is forecasting a smaller than expected deficit of $4.1 billion.
As the budget looks forward to 2028-29, there’s no projected balance on the horizon.
Taxpayer-supported debt is now expected to soar to $109 billion in the province with a population of five million.
Smith has said Alberta is under strain as more people arrive, but those numbers are levelling off.
After the province gained 220,000 residents in 2023-24, data from Statistics Canada shows immigration and migration levels to Alberta dropped considerably. Of that total, just over 100,000 were non-permanent residents, such as international students, temporary foreign workers and family members.
Population growth is expected to slow sharply in 2026-27, and the province is seeing net outflows of non-permanent residents.
Oil prices for decades have been both a golden goose and an albatross for Alberta, as successive governments promised to try to diversify the economy to avoid reliance on steep swings in revenue tied to oil prices.
Horner said every $1 drop in the WTI price now carves out about $680 million from the province’s bottom line.
As recently as last year’s throne speech, Smith’s government indicated that oil is and will remain the key driver.
“The vast majority of Albertans do not want deep and disruptive cuts, nor do they want declarations of economic emergency used as a pretext for a proliferation of government programs and spending,” Lt.-Gov. Salma Lakhani told the house at the time.
“They want calm, steady and smart fiscal leadership until the dip in energy prices inevitably passes, as it always does.”
This report by The Canadian Press was first published Feb. 26, 2026.
— With files from Aaron Sousa
Lisa Johnson and Jack Farrell, The Canadian Press
