Alberta Finance Minster Iris Evans released the province's third-quarter economic update Thursday in Edmonton. (CBC)

Alberta is on track to end up with a deficit of $1.4 billion at the end of the 2008-09 fiscal year, according to the province's third-quarter update, released Thursday.

These latest numbers show a $3-billion drop from what the province originally forecast in its April budget when it predicted it would end the year with a $1.6 billion surplus.

The losses come from downturn in financial markets which have hammered Alberta's investments, Alberta Finance Minister Iris Evans said.

"A loss of roughly 15 per cent — that's regrettable," Evans said.

But revenues are still $1.6 billion higher than expenditures, with the government taking in $38.7 billion and spending about $37.1 billion.

However, a $3 billion loss in the Trust Fund and other endowments leave the government with a "technical deficit" of $1.4 billion.

"So. Is that a deficit?" Evans asked. "Because the way that government tracks money, and reports money and reports it to Albertans on a quarterly basis, yes we have a deficit."

Revenues from resources are up $580 million from what was budgeted because of higher oil and gas prices last summer, Evans said.

"The good news side is that on the operating side, we're relatively in order," she said.

Since Heritage Fund and endowments will absorb the losses, cash is available to cover the shortfall and pay for its $2-billion commitment to carbon capture and storage research.

It also still plans to spend $195 million on the Green Transit Incentives Program (Green TRIP), with the remaining $2 billion to be invested when the financial picture gets better.

The government will delay about $400 million in capital spending, with most of the cuts occurring in health care facilities.

The fund was valued at $14.5 billion on Dec. 31, down from the $17 billion it was worth at the start of the fiscal year.

The third quarter results cover the period from Oct. 1 to Dec. 31.

Next year's budget will be released on April 7, and Evans said Alberta will have a deficit next year.

Cabinet ministers have been instructed to lower their expectations, she said.

Alberta NDP leader Brian Mason slammed the government for using what he called "voodoo economics."

"When they raid $3 billion worth of savings from the Heritage Savings Trust Fund, and they invest it in carbon capture and storage, they're stealing the savings of Albertans ... and they're investing it in oil patch welfare."

Mason added he is troubled by Evans's contention last week that the economy should recover by next year.

"I think that she's looking at the future or encouraging Albertans to look at the future with rose-coloured glasses on, and I don't think that it's the reality," Mason said.

Liberal finance critic and Calgary MLA Dave Taylor said he wants to know what the cuts in capital spending will mean for health care in Alberta.

"I think the people of Alberta want to know that because the people of Alberta are tired of waiting in emergency for 13, 14 hours when they're sick," he said.

Alberta currently has legislation that prohibits the government from running a deficit.

The change in the province's fortunes means those laws may need to be altered, Evans said.

Just last summer, when oil was at a high of $147 US a barrel, the province was forecasting an $8.5 billion surplus.

But a drop in crude oil prices and turmoil in the world economy put a dent in that surplus. By the end of the second quarter on Sept. 30, the projected surplus had shrunk to $2 billion.

With files from the Canadian Press