Nate Horner's big deficit budget
Another year, another Alberta budget at the whim of oil and gas royalties
There’s a baked-in analysis in every Alberta provincial budget that is impossible to ignore: Alberta relies too much on revenues from oil and gas royalties to fund the daily operations of government.
The other baked-in part of the analysis is what Albertans want: well-funded public services without having to pay more taxes for them.
From a first glance, it sure looks like that’s what Albertans got in Minister of Finance Nate Horner’s budget tabled today in the Legislature.
The budget doesn’t appear to include any big spending cuts, but it does include something Conservatives in this province used to like saying they wouldn’t do: run a deficit. This budget runs a big deficit of $9.4 billion and projects deficits for the next two budgets.
Consecutive budget deficits were supposed to be prohibited by the United Conservative Party’s fiscal framework but Horner didn’t try to bury it deep in his speech, instead addressing it head on in his first few sentences.
“It’s clear - this year will require tough choices. Some of them won’t be popular. But all of them will be necessary to face the challenges ahead. I also want to be very clear – that, yes - Alberta is running a considerable deficit this year … But we’re not making massive program cuts … And we’re not raising personal income taxes.
Horner spoke about the need to make tough choices and peppered his speech with plenty of cliches about Alberta’s toughness, but he didn’t really elaborate on what those tough choices will be.
At $83.9 billion, this is a record spending budget in Alberta. The budget also pushes the government’s debt over the $100 billion mark for the first time in the province’s history — another thing Conservatives in Alberta used to say they would never do.
The over reliance on resources royalties is why it’s sometimes hard to read too deeply into the deficits or surpluses announced on Budget Day in Alberta.
Oil production in Alberta is at record highs, but a lower than predicted international price of oil hit provincial coffers especially hard after Premier Danielle Smith‘s government implemented a long-promised cut to provincial income taxes last year. And because the Alberta government doesn’t control the international price of oil, which can drastically change in response to world events, the deficit could be much lower or higher in the months to come.
The royalty roller coaster, as former premiers Jim Prentice and Rachel Notley described it more than a decade ago, is the big reason why government’s have largely avoided having to make tough decisions about revenue and spending in Alberta. When times are good, governments don’t want to take big risks. When times are bad, governments don’t want to take big risks.
As a communications and political tool, Budget Day does gives us a preview of the government’s priorities and direction for the next year. In this case it looks like they are following the baked-in part about not cutting funding for public services or increasing provincial taxes, instead limiting most increases to below or around the rate of inflation and increasing service fees and the provincial portion of property taxes collected by municipal governments.
The increases included in the budget won’t address many of the big staffing and capacity challenges facing the public health care and education systems, but it also doesn’t burn down the house.
Looking at the top-line numbers, it’s hard to point out how Horner’s budget might be too different from an NDP or Progressive Conservative budget, but it’s the UCP’s approach to the future of public services where you will find the biggest difference.
The UCP has pursued a fairly aggressive privatization agenda in health care and education, expanding private surgical clinics while completely restructuring administration of the public health care system, and promoting the opening of new charter and private schools.
Horner’s budget doesn’t turn up the heat
Ahead of what is expected to be a chaotic political year, this budget probably won’t turn up the heat any hotter than it is already cranked after Premier Danielle Smith’s televised address last week during which she blamed immigrants for the strain on public services and announced a suite of referenda to ask Albertans whether new Canadians should be able to access public services in our province.
Smith’s deeply troubling blame game came just two years after she was openly talking about Alberta reaching a population of 10 million people and demanding that Prime Minister Justin Trudeau increase the number of immigrants moving to Alberta.
Smith’s nine referendum questions will be paired with a possible vote on Alberta’s separation from Canada, which will almost certainly be one of the most divisive debates in Alberta politics in generations.
Who said what: Reactions to the budget
NDP Opposition Leader Naheed Nenshi:
“The UCP government has spent so much money to deliver so little for Albertans. After seven years under the UCP, life is demonstrably harder for Albertans, and this budget doesn’t help. In fact, it makes life more expensive and doesn’t fix health care or education.”
NDP Finance critic Court Ellingson:
“All of these rising costs are despite years of extraordinary resource revenues and record production. Under these conditions, Albertans should be seeing economic stability, more jobs, and better outcomes from the services they rely on, yet somehow this government can’t balance the books or deliver results.”
Calgary Mayor Jeromy Farkas:
“Calgarians at this point are contributing more than ever before in provincial property taxes and the provincial portion of the property tax increased by 15.6 per cent in 2025 and we’re going to see a very similar increase in 2026. This represents an increase of more than 30 per cent over the past two years. An equivalent to a total of more than $1.1 billion annually.”
“We’re pretty much on track for having about a 50-50 share of property taxes being delivered to the city and to the province. What this means essentially is that we’re getting very close, perilously close, to half of every property tax dollar being collected in the City of Calgary going to the provincial government to fund provincial priorities without a very clear line of sight in terms of whether that’s being invested back here in the city of Calgary.”
“If property taxes are being jacked up for Calgarians and that money is being spent elsewhere in other municipalities, we’re just seeing another version of equalization like Alberta is being taken advantage of in total, when we think about confederation.”
Alberta Municipalities:
Budget 2026 shifts the tax burden to property taxes. It shifts responsibility from the provincial government to municipalities and removes tax room for municipal priorities. We’re concerned that hiding provincial tax increases in the property tax bills that municipal governments must collect will make life less affordable for those Albertans with lower or fixed incomes.
Alberta School Board Association President Shali Baziuk:
“The Alberta School Boards Association appreciates the significant investments in K–12 education in this budget. ASBA has been working closely with Public, Catholic and Francophone school boards and government to identify and communicate needed supports.
This funding will enable school boards to make strategic decisions that benefit students and staff while addressing local priorities. School boards will review the funding manual and operational funding profiles in the coming weeks to assess the impact on their divisions.”
Friends of Medicare executive director Chris Gallaway:
“Alberta is in a health care workforce crisis. Doctors, nurses, allied health professionals and other skilled health care workers are all telling us they are burnt out, constantly working short-staffed, and looking to leave the health care system altogether. A two tier health care system will only make this worse, given that we don’t have the skilled workforce to staff two health care systems: one for the rich, and one for everyone else.”
United Nurses of Alberta:
The public health care system needs to be strengthened so Alberta nurses and health care workers can deliver the best patient care possible to Albertans. That means increasing capacity so we have enough staff, space and resources for Albertans to access health care when and where they need it.
United Nurses of Alberta remains deeply concerned that the provincial government continues to drastically reorganize the public health care system and throw open the door to the Americanization of health care.
AUPE President Sandra Azocar:
“Alberta is desperately short of continuing-care spaces, but this budget simply does not invest enough in Alberta’s aging population. AUPE members see it every day. Acute-care patients are already shipped to facilities where they’re not getting the level of care they need. It’s only going to get worse now.”
Calgary Chamber of Commerce President & CEO Deborah Yedlin:
“Education, healthcare and infrastructure are the fundamental building blocks that underpin economic activity, contributing to a workforce that is strong, educated and supported. However, we remain disappointed by the lack of initiatives that directly help Calgary businesses manage costs, including an increase in property taxes to cover education funding. With 58 per cent of Calgary businesses citing cost-related pressures as their biggest concern, additional support is needed to boost business confidence.”
CUPE Alberta President Raj Uppal:
“For the last six years, the UCP slashed corporate taxes, underfunded education, underfunded health care, cut post secondary funding, and cut municipal funding. In today’s budget, we have a huge deficit, tax increases, and they’ve still not reversed their own cuts to education and health care. There’s a crisis in health care, but no new funding for hospitals or primary care. Classrooms are overcrowded, but no funding for a single new public school.”
Alberta Teachers’ Association President Jason Schilling:
“The government’s historic $10.8 billion investment in education recognizes the urgency of the crisis teachers have been describing for years. Teachers, students, parents and communities demanded better for public education. This funding is proof that their advocacy was successful.”
Progressive Contractors Association President and CEO Paul de Jong:
“This is a much more sober budget than what we’ve seen elsewhere, and it reflects the fiscal reality Alberta is facing. Maintaining a strong capital plan is important. In a constrained environment, the focus must be on execution—getting projects built efficiently, on time and with the kind of fair, competitive procurement Alberta is known for.”
Montreal Economic Institute economist Taylor MacPherson:
“It’s an unfortunate milestone that the Alberta government expects to pass this year, as debt is projected to exceed $100 billion for the first time in our history. As worrisome as this year’s deficit is, the fact that there’s still no return to balance in sight means we’ll keep piling on more and more debt on our collective credit card, at great expense.”
Pembina Institute Director of Government Relations Jan Gorski:
“As the world becomes more volatile, oil prices become less predictable. Today’s deficit is a reminder that Alberta is not in control of this – and its budget remains highly vulnerable to oil price fluctuations, no matter how much oil and gas is being produced. With production at record highs this year, and yet still a significant deficit, the answer is not to double down on more oil and gas development. With global investment in clean energy now double investment in fossil fuels, Alberta must actively seek out other, more reliable sources of revenue.”
Canadian Taxpayers Federation executive director Kris Sims:
“Spending is up, debt is up, taxes are up and this is a terrible budget for taxpayers. This spending is irresponsible with the debt hitting $100 billion for the first time and this government isn’t even bothering to make obvious spending cuts.
The Alberta government needs to stop wasting so much money.”
Pre-Budget Deputy Minister changes
Orders-in-Council released on Wednesday afternoon show that Darren Hedley has been appointed as the Deputy Minister of Finance and Treasury Board. Hedley previously filled the position in an acting role under Deputy Minister of Executive Council Dale McFee and worked as Associate Deputy Minister in the department before that.
Hedley replaces Katherine White, who was late last year appointed as the Deputy Minister of the Department of Finance in the Yukon territorial government. She previously worked as Deputy Minister of Jobs, Economy, and Innovation and Deputy Minister of Economic Development, Tourism, and Trade, and also worked as the Chief Economist for the Alberta government.
Edmonton Police Service chief technology and change officer Ron Anderson was appointed Deputy Minister of Operations. Anderson is at least the third former EPS executive hired into a senior administrative role since McFee, the former EPS Chief, was hired as the head of the public service last year.
Other former EPS senior administrators now working as deputy ministers include:
Enyinnah Okere, Deputy Minister of Communications and Public Engagement
Justin Krikler, Deputy Minister of Public Safety and Emergency Services
Recommended reading and listening
Postmedia Don Braid weighed in on my recent column about Rakhi Pancholi and Naheed Nenshi.
Evan Scrimshaw wrote about the Liberal Party’s recent polling surge in Alberta and the need to investigate American interference in Canadian politics.
Andrew Coyne wrote in the Globe & Mail about the push by Smith and federal Conservative leader Pierre Poilievre to blame immigrants for the strain on public services.
“Danielle Smith’s planned referendum isn’t just dumb, it’s incredibly risky,” writes Jen Gerson in The Line.
Corb Lund spoke with Ryan Jespersen on Real Talk and Rob Breakenridge on The Line Alberta Podcast about the No New Coal Mining in the Eastern Slopes of the Rocky Mountains citizen initiative petition.
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I will be travelling to Ottawa next week to attend the Broadbent Institute’s Progress Summit. I am interested to hear what some of the voices in Canada’s progressive movement have to say about the current state of the country, our politics, and the challenges coming from south of the border and beyond. If you see me there, please say hi!
Thanks again,
Dave
Setting the oil price at 60 dollars a barrel is much more realistic. It has been sitting at 65 for almost a month. Spending heavily on education and health is an investment we need to do. Let's get thru a tough stretch, increase production and we will pay this deficit off .
It's concerning the Smith government hasn't published the spending from the budget over the past years. Also curious that Smith & her Minister of Finance didn't/couldn't articulate where the money went? Smith blamed immigrants yet, they work & pay taxes. While they may have a capital plan, no new infrastructure was built? The expenditure side of the ledger seems a bit fuzzy?