Prince Edward Island is projecting another record deficit for the 2026-27 fiscal year, and according to the latest operating budget tabled Tuesday by Finance Minister Jill Burridge, the government faces difficult decisions — including a move that will see Islanders’ electricity bills rise.

The budget projects revenues of $3.4 billion and planned spending of $3.8 billion, resulting in an estimated deficit of about $410 million.

That’s more than double the $183.9-million deficit originally projected for 2025-26 in last year’s spring budget — itself a record at the time. That number, though, has increased sharply since then with the deficit now forecast for 2025-26 at about $449.6 million.

Deficits are expected to decline in the coming years, with projections of $386.2 million in 2027-28 and $338 million in 2028-29.

“This is a budget of some very difficult decisions this year, absolutely,” Burridge told reporters.

“And it doesn’t end here.”

Meanwhile, the province’s net debt is projected to continue climbing: from $3.8 billion at the end of the 2025-26 fiscal year to $5.1 billion by 2028-29, an increase of roughly one-third.

P.E.I.’s auditor general has raised concerns about the province’s financial situation, warning that large deficits and rising debt could pose long-term risks.

Spending cuts

With spending rising and debt growing, Burridge said the province has had to make difficult choices.

One of the most significant reductions is in the Department of Transportation, Infrastructure and Energy, where spending is dropping from $317.7 million last fiscal year to $279.1 million, which is a decrease of nearly $40 million.

A big part of that reduction comes from the elimination of the P.E.I. Energy Rebate Program, which provided a 10 per cent subsidy on the first 2,000 kilowatt-hours of monthly residential electricity use.

The rebate, which averaged about $175 per year per customer, will end after June, meaning many Islanders can expect higher electricity bills.

Burridge said those funds are being redirected into a new program, the P.E.I. Essentials Benefit.

Under the program, individuals will receive $310 annually, while couples will receive $365. The full benefit will be available to households earning up to $95,000, with payments gradually reduced for incomes between $95,000 and $114,000, and tapering to a baseline amount of about $175 for higher-income households.

The benefit is set to take effect July 1, with payments issued quarterly.

“What we decided to do … through the P.E.I. Essentials Benefit was take that money, put it directly into Islanders’ pockets so that they can spend it how they how they wish, and whether that’s on groceries, housing or putting it into their electricity bills,” she said.

Other programs are also being scaled back or paused.

Burridge said the Tariff and Trade Contingency Fund, introduced in last year’s budget, is being cut due to low uptake. The Community Housing Expansion Program is also being paused.

Burridge, who chairs the cabinet committee on fiscal responsibility and red tape reduction, said there will be a comprehensive review of government spending.

Premier Rob Lantz has given the committee 12 months to develop a plan to address the province’s mounting deficit and debt.

“It’s going to be a tough budget next year and the year after,” Burridge said. “It is consistent applied effort through these really difficult times.”

New taxes and revenue measures

The budget also introduces several new revenue measures.

A new personal income tax bracket will apply to income over $200,000, expected to generate about $4.4 million annually, the finance minister said.

Non-resident property owners will see their tax rate increase by 20 cents per $100 of assessed value, while the insurance premium tax will rise by 0.25 per cent. These property tax changes are expected to bring in an additional $2 million.

Health care

Health spending continues to make up the largest share of the budget.

Health P.E.I.’s budget is increasing from about $1 billion in 2025-26 to $1.2 billion this year. Combined with the Department of Health and Wellness, total health spending is expected to reach about $1.4 billion.

Highlights include:

• $57.8 million for primary health care, including patient medical homes and team-based care.
• $30.9 million for recruitment and retention of health-care workers.
• $25.8 million to support operations at the UPEI faculty of medicine and health sciences centre.
• $15 million for at-home care programs for seniors.
• $5 million for 85 new long-term care beds.
• $76 million for access to drugs on the provincial formulary.
• $4 million toward the Prince County Hospital Foundation project.

Education

Spending for the Department of Education and Early Years will rise from about $115 million to $131 million.

Highlights include:

• $1.4 million to increase human resources and policy capacity in response to the Jenkins report.
• $4.2 million to create 400 new early learning spaces.
• $410,000 to implement the cyberviolence prevention strategy.
• $12 million in bursaries for post-secondary students.