New figures projecting British Columbia’s debt at almost $213 billion by 2028 are “very, very concerning,” while the forecasted deficit has hit a record high of almost $11.6 billion for the first quarter of the 2025-26 fiscal year, Finance Minister Brenda Bailey says.
The deficit is up largely due to the elimination of the carbon tax and amid “global trade uncertainty,” Bailey said.
This year’s projected debt is $155.3 billion, but it is predicted to spike by almost $60 billion over the next two fiscal years, an increase of 37%, the government said in its first-quarter fiscal update on Monday.
Bailey said the debt “numbers are unsettling” and the government plans to bring them down by raising revenue through economic development in areas such as mining and reviewing government spending while protecting key services.
The government is on track to meet its self-imposed goal of finding $1.5 billion in savings over the next three years, including $300 million this year. Bailey said residents can expect “other changes” in the public service that “will further reduce costs, including changes to the public service.”
While Bailey did not provide details, the B.C. General Employees Union issued a statement saying the report confirms what it has been saying all along.
“Investing in public service workers is critical for sustaining the services British Columbians rely on and to driving B.C.’s economy forward — in particular in our resource sectors,” the union said.
Public service strikes
BCGEU members are entering a third week of strike action and are asking for a wage increase of 8.25% over two years.
In an interview Monday, union president Paul Finch said the announcement about the deficit “doesn’t materially change our negotiating position.”
“The civil service are not the cause of this deficit, and we’re not going to have them balance it based on poor choices on the backs of our members,” he said.
Bailey rejected deep cuts to the public service, saying the government will review spending carefully while protecting services.
“It’s happening in a number of different ways, across every ministry, but also across all government and the health authorities review, which (Health Minister Josie) Osborne is leading,” she said. “So you will see us continue to do this work, because we must get these deficit numbers down.”
The deficit is projected to increase over the next three years, from $11.6 billion in 2025-26 to $12.6 billion in 2026-27 and $12.3 billion in 2027-28.
Gross domestic product growth in B.C. has also been downgraded for 2025, forecast at 1.5% from 1.8%, while it has been lowered for 2026 to 1.3% from 1.9%.
“B.C.’s diverse economy and greater access to non-U.S. markets puts us in a stronger position than many of our peers to weather global trade instability, but there is no doubt that tariffs and uncertainty are having an impact and contributing to lower outlooks for 2025 and 2026,” Bailey said.
Exports dropped 0.6% in June 2025 compared with June last year. The update also shows other economic metrics have fallen, including home sales, new housing starts and population growth.
Tobacco settlement accounting
B.C.’s current deficit would appear even worse were it not for a windfall from a recent court settlement paid by tobacco companies.
The province is expected to receive $3.7 billion over the next 18 years, but Bailey’s update counts $2.7 billion of the settlement as revenue in the fiscal plan for 2025-26.
Ministry staff told reporters during a technical briefing that adding the money as revenue in this fiscal year represents standard accounting practice.
Staff also acknowledged that not all the money would be available as cash in hand, with the government having to borrow to cover the temporary shortfall.
“This isn’t a magical number out of nowhere,” Bailey said. “This is a real thing.”
She said counting the settlement money now, while it is still coming in, was a staff decision and not made at the cabinet table.
Peter Milobar, finance critic of the Conservative Party of B.C., said the decision to move forward the tobacco settlement is “most concerning” because it shows a government “desperate” to hide the true size of the deficit.
Milobar also said the government is vague about its plans to cut costs.
David van Hemmen, vice-president of the Greater Vancouver Board of Trade, said in a statement the figures confirm that provincial finances are “not on a sustainable path.”
“Debt-fuelled spending and persistent deficits” have left less room for investments on which British Columbians depend, he said.
“We need an agenda for economic growth that lowers costs, enables faster building and provides new market opportunities.”
Van Hemmen acknowledged the effects of tariffs but called on the provincial government to increase confidence and certainty.
Bailey said the province continues to have one of the lowest debt metrics compared with other provinces, noting the debt-to-GDP ratio of 24.5% for 2025-26 is “significantly” lower than Ontario’s and Quebec’s, which are around 40%.
“While our debt remains manageable compared to our peers, we have work to do to bring the debt-to-GDP ratio down over time.”