Finance Minister Iris Evans holds a copy of the budget before tabling it in the legislature in Edmonton on Tuesday. (CBC)

Alberta's fortunes took a dramatic turn Tuesday as its Progressive Conservative government introduced a budget with a $4.7-billion deficit, the province's first in 16 years and its largest ever, as it puts billions toward infrastructure funding and forecasts deficits through to 2012.

A total of $8.9 billion in deficits are projected for this fiscal year and the two following years, with a return to surpluses in the 2012-13 fiscal year, Finance Minister Iris Evans announced Tuesday as she tabled the budget in the legislature in Edmonton.

The projection for next year depends on the province finding another $2 billion when the budget is put together. If revenues don't increase, cuts may have to be made.

But in a pre-speech news conference, both Evans and Treasury Board President Lloyd Snelgrove said there have been no discussions about any cuts, wage concessions or new taxes — and they will continue to monitor the economic situation as the year progresses.

"We're going to have to be very open with Albertans," Snelgrove said. "We do our quarterly updates and we're going to show them as we go forward what our plans will be to address the dollars that we don't have."

Snelgrove said the province will likely sit down for discussions with Alberta's public sector unions.

"No question, when half our expenses are salary-related, that they have to be a big part in the go-forward if the financial situation worldwide and in Alberta continues to deteriorate," Snelgrove said, adding that the province will discuss any proposals with the unions to keep people working.

"I think it's important that we keep as many people working in Alberta as we can and I think unions, by and large, have the best interests of their members at stake."

Revenues from resources drop

Government revenues have declined 11 per cent to $31.7 billion, with expenses estimated at $36.4 billion. The revenue drop is mostly due to a decrease in the money the government makes from resources — an estimated 52 per cent dip in one year, the second-largest percentage fall the province has ever seen.

The government plans to spend $7.2 billion this fiscal year on infrastructure projects, such as health facilities, schools and roads, with total spending of $23.2 billion over the next three years.

Funding for the development of carbon capture and storage technology is still going ahead, with $100 million committed for fiscal 2009-10, and a total of $800 million over three years. The $2 billion previously announced for the fund remains intact, with spending spread out over 12 years.

The government also announced some cuts — including decisions to no longer cover chiropractic services, a move estimated to save $53 million a year, and not cover gender reassignment surgery for new patients, with an estimated savings of $700,000 a year.

People who receive benefits under the province's Assured Income for the Severely Handicapped (AISH) will see an increase of $100 a month, from $1088 to $1188. Seniors' provincial benefits will also increase, $40 a month for single people and $60 for couples.

Deficits were not allowed under Alberta legislation introduced in the 1990s while Ralph Klein was premier, so Evans also tabled proposed amendments to the Fiscal Responsibility Act on Tuesday.

The amendments allow the government to borrow for capital projects and allow deficits to be offset by transfers from the province's Sustainability Fund, which will now also include money from the province's capital accounts.

The province plans to dip into the Sustainability Fund to make up this year's budget shortfall.

For the first time in many years, the government plans to borrow to finance capital projects, with $1.1 billion a year planned over the next three years.

Budget doesn't deal with economy: opposition

Tuesday's budget was a dramatic turn for a province that just a year ago was projecting a $1.6-billion surplus. At one point last summer, the projected surplus was as high as $8.5 billion. But then the price of oil tumbled and the world's economy started its decline.

The opposition slammed the government for a lack of planning and for not dealing with the economy.

"It's a demonstration, clearly, of a government that has failed, failed its fiduciary responsibility to Albertans, failed to plan for future generations, failed to move us towards a more sustainable economy," Liberal Leader David Swann said.

Swann asked why the government didn't include incentives to make the economy more "green" or plans to upgrade more bitumen in the province.

"There's no clear plan to invest in the kinds of infrastructure that Albertans are asking about, including upgrading of more of our bitumen here, increasing our public transit buses and light rail transit and a bullet train."

NDP Leader Brian Mason said he was disappointed at a lack of incentives to create jobs and to keep people working, and he criticized the government for not committing to any action for dealing with next year's potential additional $2-billion shortfall.

"They're really trying to keep their options open, and people who think their jobs are secure today may find themselves on the unemployment line tomorrow," Mason said.

Mason called the cuts to chiropractic care unfortunate and said they were false savings because chiropractic treatments keep people out of the health care system.

'Finger in a hole in the dam'

Were the province serious about cutting spending, it would have started right now, especially to cope with the potential $2-billion shortfall, said Scott Henning, Alberta director of the Canadian Taxpayers Federation.

"They should have been making these cuts prior to this budget, not sticking their finger in a hole in the dam and praying that it doesn't flood over in the next few years," Henning said.

"Because things could get better, things could get worse, and they've taken no corrective action. All they've done is pull money out of savings this year and said, 'We're going to take corrective action next year.' "

"What it looks to me is that they've got their fingers crossed, hoping that revenues are going to recover so they won't have to make those cuts," said Danielle Smith of the Canadian Federation of Independent Business.

Smith said she was hoping the government would take measures to avoid racking up high deficits like it did in the 1980s.

"This just looks like history repeats. And we'll see three or four years from now whether or not they do just end up blowing through their savings, as it looks like they're going to."