B.C.’s deficit is expected to reach a record-high $13.3 billion in the 2026/27 fiscal year, according to the province’s 2026 budget.
That’s in spite of what the province’s finance minister calls ‘careful choices’ in the three-year fiscal plan, including a reduction in the public sector workforce, a re-pacing of the capital plan, and an increase in some taxes to bolster government revenue.
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And it comes after Brenda Bailey and Premier David Eby both acknowledged repeatedly that the deficit must come down.
Bailey says ‘careful, difficult spending choices’ will work to push the deficit down over the three-year plan to a projected $11.4 billion in 2028/29.
However, the forecasts remain significantly higher than projected in last year’s budget. Budget 2025 forecasts a deficit of $10.9 billion for 2025-26, $10.2 billion for 2026-27, and $9.9 billion for 2027-28.
Taxpayer-supported debt is also expected to jump this year, with the debt-to-GDP ratio expected to exceed 30 per cent this year, up from 26.1 per cent for 2025/26, before spiking to 34.4 per cent in 2027 and 37.4 per cent in 2028.
Bailey dismissed questions about how the province got to this point, blaming everything from what she called sixteen years of underfunding of core services by the B.C. Liberals, who last held government in 2017, to the COVID-19 pandemic, and the trade war launched last year by U.S. President Donald Trump.
She similarly waved away questions about the amount that B.C. will pay in interest over the next three years — greater than the annual budgets for many provincial ministries.
Bailey said the good news is that this year’s deficit has come in lower than expected. The third quarter of the 2025/26 fiscal year puts the provincial deficit at $9.6 billion, down from the nearly $11 billion originally projected in last year’s budget.
Provincial budget documents show some $1.6 billion dollars in savings were found through higher income tax revenue, both through personal and corporate streams, along with refundable tax credits and other expense changes.
The provincial government still anticipates about $18.7 billion in capital spending in the 2026 fiscal year. The budget allocates about $38 billion dollars over the three-year plan.
Bailey’s presentation also stressed her office’s position that B.C.’s taxpayer debt remains affordable compared to our provincial peers, including in Ontario and Quebec.
Bailey said Tuesday that the plan is “not an austerity budget” as was heavily speculated in the weeks prior to its release, but characterized it instead as a prudent one that takes into account global trade uncertainty caused in part by U.S. tariffs.
She said a 2.7 per cent decrease in exports to the United States as of November 2025 was offset by a 3 per cent increase in exports to non-U.S. trading partners — but acknowledged that B.C.’s languishing forestry sector has seen sustained losses.
B.C. is forecasting slow to moderate economic growth over the next two years, but is pushing forward on its ‘Look West’ strategy with funding commitments to bolster the province’s skilled trades workforce.
The 2026 budget includes $241 million to double funding for SkilledTradesBC, along with added commitments to bolster engineering, geology, computer science, biology, and aerospace training programs and apprenticeships in the province.
The province is also establishing a new $400 million British Columbia Strategic Investments Special Account, which is intended to help B.C. take advantage of federal funding opportunities for new projects to protect Canada’s sovereignty and economy.
“The special account will help the province attract investments that leverage B.C.’s strength in sectors such as clean energy, sustainable forestry manufacturing, responsible mining, and clean technology,” the budget reads.
Bailey said there are a number of external factors that present major risks to the fiscal plan. Those include the impacts of federal immigration caps on our job market and housing starts; increased costs in case of emergency or disaster; and global trade uncertainty affected by tariffs and the upcoming review of the Canada-United States-Mexico Agreement (CUSMA).
The budget is predicated on the assumption that U.S. tariffs will continue to have a major impact on B.C.’s finances. The numbers are based on the tariffs currently in effect on Canadian exports to the U.S. — including a 35 per cent duty on goods not compliant with CUSMA, ten per cent on softwood timber and lumber (with added anti-dumping and counteravailing duties).
However, the document notes that many key tariff targets — like the auto industry and potash sectors — have less of an impact on British Columbia’s economy than on our neighbours.
“B.C. is less exposed to U.S. trade than other provinces, with nearly half of all goods going to non-U.S. destinations,” the budget notes.
“[However], B.C.’s outlook for international trade remains uncertain as Canada renegotiates CUSMA and works to diversify trade to new foreign and domestic markets.”
