Alberta has posted an $8.5-billion surplus, twice the amount originally forecast, the government announced Thursday.

Finance Minister Lyle Oberg said his counterparts across Canada are "extremely envious," but he warned that economists predict that resource revenue will continue to decline, leading to smaller surpluses in the future.

The province pulled in $38.6 billion in revenue in 2006-07, $2.7 billion higher than the year before.

Resource revenue was down $2.1 billion to $12.3 billion, mostly due to lower natural gas prices. At the same time, the province's expenses hit $29.7 billion, up $2.5 billion from the year before when the province's surplus was a record $8.7 billion.

Albertans helped fund the surplus with their tax dollars, said Oberg.

"There's been incredible growth and change in 2006. We led the country for the third consecutive year in economic growth. Population grew by nearly 100,000 people in the province of Alberta and we had the lowest unemployment level in three decades."

More people not only meant more income tax revenue, but record spending at casinos, liquor stores and on tobacco.  

The surplus will be divided among:

• Various savings funds.
• The capital account, which helps pay for projects already planned over the next few years.
• The sustainability fund, which is spent in emergencies, disasters or sudden down-turns in revenue.

Liberal Opposition Leader Kevin Taft said the province still needs to do more to diversify Alberta's economy to reduce the impact of dwindling oil and gas reserves.

Oil and gas revenues still account for 30 per cent of Alberta's revenues, and a recent study at the University of Calgary found that half of Alberta's economy depends directly or indirectly on the petroleum sector, said Taft.

"That should set off all kinds of alarm bells," he said. "That's not diversification, and I think that's dangerous."

Economist Frank Atkins said the province had one of the highest growth rates in the world, and growth this year is still expected to be among the highest in Canada.

"Things are slower in 2007, there is no question, but slower meaning closer to a more reasonable growth rate," said Atkins, a professor at the University of Calgary. "We can't keep up with the pace of 2006."

A broad expansion of multibillion-dollar oilsands projects has given Alberta a cushion against the jarring economic fluctuations of the past, he said.

He also noted that the last time Alberta's economy went bust, interest rates had jumped to 20 per cent, demand for oil had fallen sharply and the federal government had imposed the national energy program — all factors that don't exist today.

With files from the Canadian Press