EDMONTON - Alberta Premier Ed Stelmach is predicting it will take two or three years for the province's cash flow to recover after its energy windfall evaporated over the course of the last year.

"Even if the recession ends this year or next, government revenues will lag a year or two after that," the premier told a news conference Tuesday.

"As companies move back into very healthy profit margins, that's when the government will see its revenues increase."

Alberta is now facing a record budget deficit in the $7 billion range this year.

Stelmach assured Albertans that there are no plans to raise taxes or cancel $20 billion in building projects planned over five years, including schools and hospitals.

"We're still going to see our population increase in this province by over 50,000 this year," he said. "I believe since 1986 it's a million new people in the province. "

"People need space in schools and hospitals, we have an aging population so we need more assisted living facilities."

Despite some musings by senior cabinet ministers in recent months about possible job cuts, the premier said he's reluctant to do that.

"I don't want to put the province in a position where we lay off people and when the economy recovers we're scurrying back to re-hire people."

Alberta will use $17 billion in savings to cover deficits over the next few years, Stelmach said.

He said Albertans need to prepare themselves for belt-tightening measures, although he refused to offer specifics.

Scott Hennig with the Canadian Taxpayers Federation said the government needs to cut spending or face the prospect of wiping out Alberta's emergency savings account.

"They really do have a spending problem, not a revenue problem, and as such they should be looking to start cutting," Hennig said in an interview.

"They should be talking to the unions saying, 'Look, we can either roll back wages or we can start laying people off,"' he said. "There's lots of cases in the private sector where employees have said, 'We would rather take a wage rollback than lose our job during a recession."'

Stelmach said one of his senior cabinet ministers has been meeting with the unions representing government employees to talk about concessions.

But Doug Knight, president of the Alberta Union of Provincial Employees, said the government has not asked for any concessions from his union, which represents 21,000 staff.

This has left many government employees nervous about their future and the rumour mill is rife with talk about job cuts or layoffs, said Knight.

Economist Andre Plourde said Alberta's Conservative government has a history of running deficits when energy revenues decline.

"On a per-capita basis, Alberta is the highest-spending provincial jurisdiction in Canada," said Plourde, a professor at the University of Alberta.

"It's also clear that we finance a lot of this spending by treating our revenues from non-renewable natural resources as if they were a permanent flow of income."

Plourde suspects the government will wait until the new provincial budget in the early spring to reveal any major spending cuts or layoffs.

Political analyst David Taras said it shouldn't come as a surprise that it will take years for the province to recover from the economic downturn.

"What's amazing to me is how long it has taken for the Stelmach government to start talking about these issues," said Taras, a professor at the University of Calgary.

There may be a political backlash against the Tories if they continue to keep Albertans in the dark about cost-cutting measures that will likely be needed, said Taras.

"There's a smouldering discontent among Albertans because of the uncertainty," he said. "If it comes to the point where the Stelmach government isn't taking the bull by the horns, then the danger is the anger will be directed towards them."

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