Forestry revenues in B.C. are down following a prolonged industry slump. (Jeff Bassett/Canadian Press)

Timber revenues are down almost 50 per cent, and it is going to take some creative thinking to revive the slumping forestry industry, B.C.'s forest minister says.

Forestry revenues normally pour more than $1 billion into the government's pocket from taxes and fees, but this year just $652 million in government revenue is forecast, making 2008/09 the worst year on record, Pat Bell said.

"This is probably going to be one of the most challenging years that we've had in the terms of revenue for the forest industry," Bell said on Monday.

It's just one of the factors contributing to an $804-million drop in overall government revenues for the fiscal year, a drop forecasted by Finance Minister Colin Hansen on Monday.

Hansen downgraded the forecast budget surplus from $1 billion to $450 million, and warned of tightened spending in coming months.

Creative thinking needed

Bell blamed low lumber prices and the sagging U.S. housing market for a slump that has pulled down the industry over the past year, but remained optimistic about finding new markets in China.

So far, more than 10,000 forestry workers have been laid off as part of the recent downturn, but B.C. has already signed on new lumber customers on a recent trade mission to China, he said.

"We've got to get creative. If we think we've got to just tell the Americans they've got to take more of our lumber, we're kidding ourselves. We've got to look for new markets and do it aggressively," said Bell.