British Columbia’s deficit is only going up, according to the latest budget update.
The province’s first quarterly report for 2025-26, released Monday, shows an updated deficit of $11.6-billion.
That is up from the $10.9-billion shortfall forecast in March.
The deficit is expected to balloon to $12.6 billion next year and $12.3 billion the following year.
“While B.C.͛s diversified economy is better positioned than many to weather these headwinds, there’s no doubt that tariffs are challenging our economy and there is pressure on our fiscal position,” said Finance Minister Brenda Bailey in a statement.
She said the revenue forecast is lower mainly because of the elimination of the consumer carbon tax, which reduced revenue by $1.8 billion.
B.C. scrapped the tax April 1, at the same time Ottawa eliminated the federal carbon levy.
Speaking to reporters Monday, Bailey defended the carbon tax cut. “In reality, this is an affordability measure more than a fiscal measure, and I think that people will feel the benefit of this tax cut as time goes forward,” she said.
Revenue also fell from the property transfer tax, sales tax, natural resources and federal contributions, including delayed disaster funding.
B.C. faced higher-than-expected firefighting costs, during a wildfire season that Premier David Eby has described as the second-worst on record.
The province said the deficit is partially mitigated by B.C.’s share of an historic multi-billion-dollar lawsuit against tobacco companies.
B.C.’s share of that settlement boosted this year’s revenue by over $2.7 billion. But the province has so far only received an initial payment of $936 million, with the rest to be paid out over the next 18-years.
Bailey denied accusations of using the settlement money to soften the appearance of B.C.’s mounting deficit, insisting it was a “normal accounting treatment.”
But the B.C. Conservatives accused the government of mismanagement.
“British Columbians are being told to celebrate $2.7 billion in tobacco lawsuit money stretched over 18 years, while at the same time this government racks up record debt and delays critical hospital projects,” said Peter Milobar, MLA for Kamloops Centre and Conservative finance critic, in a statement.
The province’s total debt is projected to surpass $155 billion at the end of this year, down about $1.6 million from the initial budget forecast.
The total debt is expected to rise to nearly $186 billion next year and close to $213 billion in 2027-28.
Bailey acknowledged the province’s mounting debt is “very, very concerning.”
“That’s why we are so focused on revenue development and a careful review of government spending,” said Bailey. “We’re only starting to see that work reflected.”
She notes the province is on track to meet its three-year, $1.5-billion expenditure-management target, including more than $300 million in savings this fiscal year.
The budget update comes amid escalating job action by public service workers with the B.C. General Employers Union (BCGEU). The union represents thousands of wildfire fighters, social workers, sheriffs, correctional officers, conservation officers, court clerks and others in the public sector.
Eby has said the province is facing significant “fiscal headwinds” that will affect the deal the Public Service Agency is able to offer.
BCGEU President Paul Finch said Monday the latest update confirms the importance of investing in public service workers, particularly in the resource sector.
“Public service workers are crucial to driving B.C.’s economy forward. If this government is serious about building a strong economy and protecting the services British Columbians rely on, it must treat the workers who make that economy run with fairness and respect,” said Finch in a statement.
