Provincial Budgets 2025/26
The mess is local as well.
Much of the financial management discourse is focused on the federal government but the provincial level is just as important. As Canadians pay both provincial and federal taxes, fiscal responsibility at the provincial level also dictates economic viability and standard of living.
I would argue that besides the overall red tape that can be and is put on at the federal level, provinces have incredible opportunities to self-develop, which is unfortunately wasted. However, bad policies at the federal level have a drastic impact on provinces as they are faced with carrying the true day-to-day costs.
Pretty much all provinces have been overwhelmed with the consequences of mass immigration, impacting infrastructure, health, education, and other services. Most provinces were completely mismanaged to begin with, and the added external pressures are pushing many to their worst financial positions yet.
Federal and provincial inflation-adjusted debt has been growing per person in every province since 2007/08. It increased by around $600B to right before COVID, and the debt took off afterwards. Here is what the net debt per person looks like for each province, and of course, the interest it is costing to carry it.
Unsettlingly, the numbers above might be much better than the numbers we will have in the future. Most of the planned Provincial budgets are overflowing with red.
Ontario’s 2025 budget puts infrastructure at the center of economic growth. $200B was allocated over the next 10 years for infrastructure investment with $33B of it will be spent in the next year. The deficit will grow by an extra $10B dollars more than projected last budget and by another $7B the following year before returning to positive.
Ontario’s net debt to GDP will climb to 38.6% and will have a debt servicing cost of $17.8B. The province will have a 211% net debt-to-revenue ratio.
Quebec, which received hundreds of billions in equalization payments over the years, is planning on a record deficit of $13.6B over its 2025-26 fiscal year and billions in additional deficits until 2029-30 when it hopes to achieve balance with a higher boost from federal transfers. Quebec is funding economic growth with aggressive support for businesses and innovation, which, in general, is a good move.
Quebec’s net debt to GDP will increase by 3.2% to 41.9% over the next few years, and debt servicing will cost them $10B in the next fiscal year. Their budget might raise some alarms with the credit agencies, but the final numbers of 2024-25 have a lower-than-expected deficit.
Prince Edward Island has abandoned any plans to return to a balanced budget and is planning on the province’s largest deficit in history. PEI is introducing tax cuts to individuals and businesses and a contingency fund.
PEI’s net debt to GDP will grow from 29% to 35.9% by 2027/28, erasing years’ worth of progress with interest and amortization growing by almost one third to $413M.
New Brunswick is another province that has abandoned return to balance in its outlook. A planned shortfall of $599M in 2025/26 is its largest in years. The province’s net debt to GDP will increase to 28.5% by 2028/29 but debt servicing will increase by $90M this year alone and keep on increasing.
Newfoundland and Labrador is projecting a $372M deficit in the 2025-2026 budget as it expenditure will increase by $536M which is outpacing inflation and population growth. It is planning to get out of the red by cutting spending in the following years.
Newfoundland and Labrador has one of the heaviest debt burdens in Canada with a projected rise to 44.4% but this is another province that is set to benefit substantially from resource development. It has a gold mine coming up, an increase in oil and gas production, and renegotiation of the hydroelectric power station Upper Churchill contract with Quebec that will pay it hundreds of millions of dollars every year for decades. It has huge economic potential.
Manitoba is planning a $794M deficit in its 2025-26 budget with its largest capital plan in its history of $3.7B, with a focus on schools and healthcare centers while cutting some taxes. It is planning to return to positive territories in a few years, but its net debt to GDP will reach 37.1% and debt servicing costs will keep rising to $2.478B.
Nova Scotia is going from a surplus budget to not forecasting a return from the red and deficit of $898M in its next year. The plan is to reduce some taxes and costs, and face healthcare-related costs. The Province will reach a new high of a 40.9% net debt to GDP ratio and cross the one billion mark in debt servicing cost, reaching $1.249B - 43% growth just in a few years.
Saskatchewan has a beauty of a budget and is the only province in Canada forecasting surpluses. That’s with substantial tax cuts while still increasing support for people in need including seniors and disability tax credit that will go up by 25%.
The issue is that Saskatchewan didn’t allocate money for a contingency fund for tariffs, which its farmers got targeted by China as well, and the strengthening of the Canadian dollar may hurt exports. Finance charges will increase by $110M and it’s net debt to GDP is 14.6%.
British Columbia is yet another province that is planning on a record deficit budget in 2025-26, with a disastrous budget. BC will be spending heavily on healthcare and social services. Its debt will increase by 70% in just 3 years as expenditures will double revenue.
Net debt to GDP will rise to 34.4% as its tax-supported debt will increase from $97.7B to $166.5B. It will pay 6.9 cents per dollar of revenue just to service its debt. British Columbia better get focused on its economic development as it is projected to be have not province in the future - for no logical reason considering its recourses and ports.
Alberta got a surprise surplus in budget 2024-25 of $8.3B but is expecting a $5.2B deficit the next year. $4 billion contingency fund will contribute to the deficit and tax cuts. Alberta is benefiting from being the province of choice for interprovincial migration, which is increasing its tax revenues, but expenditures also grew by an extra $1B to service all the new residents.
Alberta will make more money as the Trans Mountain expansion came online but the price of oil is lower than expected so far. There is a good capital plan in place for infrastructure, however, the missed opportunity in Alberta’s finances is to clean out the inefficiencies of the public sector and overhaul the current money wasting waste that supports innovation and use more of its surplus to support these industries.
Net debt to GDP will grow but it will just be 9.3% which is the lowest in the country.
Essentially, all provinces are trying to facilitate some tax cuts as an economic growth tool, and that’s because the more companies can invest and reinvest, the more it will grow the economy, and so will disposable income. I’m glad that there is finally some realization to this across all Parties, and there is so much more room here.
In general, provincial budgets are mostly really bad but not horrible, and that’s because Canadians are just so overtaxed. If there were more focus on economic development, including emerging technologies and not just resources, and cutting public sector bloat and inefficiencies, we could have easily balanced budgets and much lower taxes while getting better services, and actually have money for more services in the future.