Tumbling energy prices are pushing energy-rich Alberta towards a deficit in the upcoming year — a huge turnaround for a province that recently bragged about having had 15 surplus budgets in a row.

Finance Minister Iris Evans confirmed Wednesday that Alberta's revenues may fall short of spending in the 2009-10 fiscal year, creating the first deficit in the province since 1993-94.

"If you spend more than you earn in any one given year, it doesn't matter if you've saved for that possibility," Evans said in a telephone interview from Saskatoon, where she was attending a meeting of finance ministers.

"Technically, you have to account for it as a deficit."

Alberta created a sustainability fund a few years ago to make up for any revenue shortfalls during tough times. Because provincial law prohibits deficits, any red ink would be erased by dipping into the $7.7-billion fund.

"If ... the next few weeks in the new year give us a better taste of what we're facing both on the global financial crisis as well as with our energy prices, then we would look at using the sustainability fund," said Evans.

"We're doing everything possible to avoid that, trying to sustain ourselves with the funds available."

Surplus had been forecast

Alberta had been on track for a near-record surplus of $8.5 billion in the current fiscal year, but the province was sideswiped by diving oil prices and the global market meltdown.

The surplus projection was slashed to $2 billion in last month's fiscal update as the province began to feel the full impact of lower energy prices.

The outlook began to look gloomy this fall when a half-dozen multibillion-dollar oilsands projects were delayed, scaled back or put on indefinite hold.

A forecast released Wednesday by the Canadian Federation of Independent Business suggests expectations among small businesses in Alberta are approaching a record low.

"Alberta small business optimism is below the national average," says the report. "Retail performance this holiday season is turning out to be poor by historical averages."

Evans concedes this is a "huge contrast" when you consider that the province has been gushing with energy revenues for the last several years.

"In Alberta, it's a dramatic change," she said. "I think people are reacting with concern. The volatility obviously has our government concerned."

Later than usual

The finance minister also said Alberta's next budget will be later than usual as the province adjusts to the changing economy, although the final date will be up to Premier Ed Stelmach.

"Many people are predicting it could take as long as two years for recovery," said Evans, who is hoping to see more buoyant economic forecasts in the coming months.

A spokesman for Stelmach predicted the province won't sink into a deficit in the current fiscal year, even though oil prices have plunged from almost $150 US per barrel to about $40 since the summer.

"We're OK for this year," said Paul Stanway. "The average for this fiscal year is still over $100 per barrel because of the high prices over the summer. If we're talking about next year, that's a different story."

Mike Percy, dean of the University of Alberta business school, said Alberta is still in better shape than most provinces.

"Alberta is debt-free," said Percy. "The province has more than $7 billion in reserve to help manage these extraordinary fluctuations in resource revenues."

Alberta is likely to avoid a decline in growth that's projected for Canada as a whole and Ontario in particular, he said. Forecasts for next year put Alberta's real growth at perhaps one per cent.

That would be more manageable than the frantic growth during the unbridled energy boom that left the province short of workers and support services, he said.

"Relative to people's expectations of 2005-06, it's going to look like a bust," he said. "But we're not going to see the disruption that we've experienced from an overheated economy."