The B.C. government is forecasting a record $13.8 billion deficit for the 2026-27 fiscal year, $450 million higher than forecast in February, according to the province’s first-quarter fiscal update.
Finance Minister Josie Osborne, who took over the finance portfolio last month, presented the Q1 report on Sept. 14. Osborne replaced Brenda Bailey following Bailey’s diagnosis with early-stage cancer.
The province now expects to bring in $86.3 billion in revenue this year, $789 million more than forecast in Budget 2026. However, expenses are projected to be $1.2 billion higher than budgeted, offsetting the additional revenue.
In addition, natural-gas royalty revenue is now forecast to be $531 million below the Budget 2026 estimate. About $306 million of that reduction is attributed to a calculation error in the natural-gas price forecast used in the budget.
The remainder of the decline is attributed to lower expected prices and updated assumptions related to the proposed new royalty framework.
The two largest increases in expenses are $614 million in additional wildfire-management costs and $458 million in higher refundable tax credits, the report said.
The increase in tax credits is partly due to greater-than-expected use of programs including the renters’ tax credit and the production services tax credit for the film and television industry.
Debt-servicing costs, meanwhile, are expected to be $27 million lower than budgeted.
On the revenue side, personal income tax is forecast to bring in $471 million more than expected, while corporate income tax is up $416 million and provincial sales tax is up $169 million.
The province attributed the higher personal income tax revenue largely to stronger-than-expected household income, while corporate income tax revenue has also been stronger. Higher PST revenue reflects retail-sales growth, the report said. Those gains are partly offset by a projected $33 million decrease in property-tax revenue.
Projection Errors
The $531 million downgrade in natural-gas royalty projections follows the B.C. government’s Sept. 1 acknowledgment that projection errors, including incorrect currency conversions, had caused it to overstate natural-gas revenue forecasts by about $1.46 billion over five fiscal years.
The most substantial error involved a U.S.-Canadian dollar conversion in an Energy Ministry spreadsheet, where a formula was incorrectly applied, officials said at the time.
Officials said the correction lowered the province’s 2026-27 natural-gas price forecast by 44 cents per gigajoule, while a separate conversion error reduced it by another five cents.
Natural-gas royalties and forest revenues are both expected to decline, with natural-gas royalties down $531 million and forest revenue down $49 million. Those declines are partly offset by an $82 million increase in other natural-resources revenue and a $209 million increase in mining revenue, mainly because of improved profitability of mines.
The province forecasts $12.9 billion in taxpayer-supported capital spending this fiscal year on hospitals, schools, transportation and housing. That is $716 million below the Budget 2026 forecast, largely because of changes in project timing.
Total provincial capital spending, including self-supported Crown corporations, is expected to reach about $19.7 billion.
Total provincial debt is projected at $180.9 billion at the end of the 2026-27 fiscal year, while taxpayer-supported debt is projected at $141.1 billion.
The province has also downgraded its 2026 real GDP growth forecast from 1.3 percent to 0.9 percent, although it expects growth to accelerate to 1.9 percent in 2027, the report said.
The taxpayer-supported debt-to-GDP ratio is forecast at 30.1 percent.
B.C. Conservatives Respond
Gavin Dew, the B.C. Conservative Party’s finance critic, criticized the province’s projected $13.8 billion deficit, saying the government collected more tax revenue while continuing to run a large deficit.
“This update shows they have both a spending problem and a math problem,” he said in a news release.
Dew also pointed to the province’s 0.9 percent GDP growth forecast for this year, as well as a 0.6 percent decline in employment, a 6.5 percent unemployment rate, a 9.3 percent decline in housing starts and a six percent drop in home sales.
Kerry-Lynne Findlay, leader of the B.C. Conservatives, said the fiscal update showed that the NDP government was continuing to “spend beyond its means and pile debt into future generations.” She said her party would push for lower spending, balanced budgets and “a better deal for the next generation.”
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