Yesterday afternoon, Finance Minister Brenda Bailey tabled the BC Government’s 2026/27 budget, revealing a projected $13.3 billion deficit. The shortfall, which is forecast to decrease slightly to $11.4 billion over the next three years, comes despite significant increases in income tax, property tax, and expansion of the Provincial Sales Tax base. Unsurprisingly, initial reactions from provincial stakeholders across BC have been largely negative.
Premier David Eby’s NDP government is already under scrutiny in the wake of three prior consecutive annual deficits, including the current fiscal year’s (updated) deficit forecast of $9.6 billion and a forecast provincial debt of $154 billion. For context, the final fiscal year of Premier John Horgan’s government produced a $6 billion surplus in 2022/23, and provincial debt sat at $92 billion. Since then, provincial government spending has grown 17% while revenues have grown just 3%.
Given recent provincial government messaging, many observers expected a tougher approach for this most recent fiscal plan, perhaps even resembling an ‘austerity’ budget. Instead, the budget is projecting an increase in the deficit of 38% for 2025/26 of $13.3 billion, followed by deficits of $12.2 billion and $11.4 billion in the two years to follow. In relative terms, these numbers reflect a jump from 2.2% to 2.9% deficit-to-GDP ratio in 2025/26, declining to 2.3% in three years’ time.
Capital spending is set at $13.6 billion in 2026/27, and a total of $38 billion over the fiscal plan’s three-year period, largely focused on transportation, health and education infrastructure. Correspondingly, total taxpayer-supported debt is increasing from $117 billion in 2024/25 (26.1% debt-to-GDP ratio), to $143 billion in 2025/26 (30.6%), to $189 billion in 2028/29 (37.4%). In just half a decade, BC will have transformed itself from owner of some of the strongest fiscal numbers in Canada to one of its laggards.
Key highlights from the budget include:
Cost control:
- The government expects a reduction of 15,000 FTE from the BC Public Service over the next three years, largely through attrition and targeted at ‘bureaucracy and administration’.
- Capital construction commitments would be ‘repaced’ (i.e. delayed) to maximize efficiency and control costs.
New taxation revenue:
- A 0.5% increase in taxation to the first income tax bracket, along with a ‘pause’ on tax bracket indexation is expected to net over $400 million in 2025/26, and nearly $1 billion within three years (after being offset by an increasing in the BC Tax Reduction Credit for lowest income earners).
- The PST tax base will be expanded to include several professional services that will have a significant cost impact on businesses and consumers.
- Provincial property taxes will be increased for owners of properties valued above $3 million, as well as increasing the Speculation and Vacancy Tax rate for foreign owners.
Investment and Skills-training stimulus:
- Previously announced commitments to new funding for expanding skilled trades capacity and support were confirmed.
- Previously announced First Nations Equity Financing Program will be launched with a total cumulative loan guarantee limit of $1 billion.
- New tax credits and funding were announced to spur investment in manufacturing, mining, shipbuilding and match federal stimulus programs.
- Another handful of support programs were announced specific to forest industry transition, including a temporary Stumpage Payment Deferral Program.
Social programs:
- New funding was dedicated to new/expanded programs that support traditional NDP priorities such as affordable childcare, classroom supports, specific health expenses, and community safety concerns.
- Notably, the flagship $10/day ChildCareBC program has frozen new enrolment of providers.
Overall, the reaction to the budget will likely be broadly critical and will serve to heighten what is already a very tense political scene in BC. This fiscal plan will provide significant fodder to the (currently leaderless) Conservative opposition to amplify the ‘NDP governments are poor fiscal managers’ stereotype, and will do little to assuage voters’ concerns about cost-of-living burdens. At the same time, many traditional allies of the NDP will likely be disappointed as well at the relative lack of new initiative in social and environmental programming and projected loss of public service jobs.
Expect the political pressure on Premier Eby to continue to be immense, which may lead to a variety of unpredictable actions, policies and political dynamics in the months ahead.
We’re Here to Help
For more information and insights about what these developments mean for Alberta’s and BC’s political landscape, please contact:
Ken Veldman – Senior Strategy Advisor
ken@prairieskystrategy.ca
250.600.0670
To learn more about Prairie Sky Strategy, please visit our website.
