EDMONTON - Alberta's energy boom gone bust has left the province with projections of a record $7-billion deficit and if natural gas prices continue to fall, there could be even more red ink by the end of the fiscal year.

Finance Minister Iris Evans has ordered provincial bureaucrats to find $430 million in program savings, but deeper cuts are coming as the government scrambles to trim $2 billion from the budget by next year.

"Quite frankly, our earnings took a real kick in the head," Evans told a news conference Wednesday. "We are heavily dependent on our oil and gas revenues."

"Global economic turmoil is deeper and more sustained and natural gas prices are lower than originally forecast and the result is a higher deficit than we predicted."

The new deficit number included in Alberta's first-quarter update is $2 billion more than the original budget forecast. But the latest forecast is based on a prediction that natural gas prices will nearly double to $4 per gigajoule for the remainder of the fiscal year.

Some market analysts are predicting exactly the opposite for natural gas prices in the coming months because of large inventories of gas in storage and a weaker North American economy.

Evans was coy about whether the deficit could get even worse given these dour predictions. When asked if continued weak gas prices could increase the deficit, the minister said flatly: "Not in this forecast."

Scott Hennig of the Canadian Taxpayers Federation said with financial reports this week predicting gas prices falling below $1 per gigajoule, Alberta's deficit projections are overly optimistic.

"I have no confidence that this (deficit) number is going to stay where it is," said Hennig. "I think it could reach $8 billion or even $8.5 billion."

Jack Mintz, former president of the C.D. Howe Institute, also said the deficit could end up being worse if natural gas prices fall lower. But he also said the province may be overly optimistic in its projections for tax revenue.

"I would expect that corporate taxes will fall much more than is reflected in the statement," said Mintz.

"I think that there's a potential negative shock on some of the other taxes as well."

Premier Ed Stelmach announced Tuesday that Alberta's financial pain would likely continue for at least two years after the recession ends. But Stelmach said the deficits over the next few years will be offset with $17 billion in emergency savings, so no tax increases are planned and he's reluctant to cut jobs.

But Evans offered contradictory statements on whether a series of deficits over the next few years could end up draining the entire $17 billion Sustainability Fund.

"We will not allow that the happen," she said in a prepared statement at the start of the news conference. But under a barrage of media questions, the finance minister later recanted.

"We might take it down to zero, but that's the worst-case scenario."

Evans had to revise a prediction she made earlier in the year that Alberta would weather the current economic downturn with only 15,000 job losses. The new figure is 22,000.

The minister also issued a more gloomy economic forecast of negative 2.5 per cent growth for the year, due mainly to weaker housing starts and lower than expected consumer spending.

Later in the day, Alberta's health superboard announced it will pursue a further three per cent budget cut to deal with its $1.1-billion deficit.

Stephen Duckett, CEO of Alberta Health Services, said it is looking at voluntary retirements, as well as reducing red tape and finding cost savings from providers, to lop off a further $350-million in annualized savings.

That's on top of the $650 million already saved through such initiatives as streamlining the purchasing of knee and hip replacements.

"It's important to get started and move quickly, but it's a multi-year process," said Duckett, who said despite the cuts they won't abandon their plan to improve service and cut wait times for emergency surgery.

Duckett said they don't expect to balance the budget for another three to four years, but Evans insisted that this additional public debt should remain separate from the government's red ink.

"We acknowledge that's an important consideration, but I'm not prepared to add it to the projected deficit that we've got in this budget," said Evans. "It isn't hidden away."

Despite the weak economic outlook, Alberta's population continues to grow as people migrate from other provinces. Stelmach said Tuesday he expects the population to increase by 50,000 this year.

One bit of good news in the fiscal update is a $1 billion rebound by the Heritage Savings Trust Fund, which lost roughly $3 billion when stock markets plunged over the past year.

But Alberta's Progressive Conservative government has a policy of siphoning off profits from the Heritage Fund, so $730 million will be transferred to general revenues.

Total revenue for the year is now forecast at $29.6 billion, while expenses are pegged at $36.4 billion.