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Alberta Premier Jim Prentice speaks during a news conference in Edmonton on Feb. 11, 2015.Dean Bennett/The Canadian Press

The Alberta government will run a $465-million surplus for the 2014-2015 fiscal year, Finance Minister Robin Campbell announced Tuesday – less than half of what had been budgeted almost a year ago.

Only the second surplus posted by Alberta in seven years, it could be the last one the province sees for a long time, Mr. Campbell said.

Premier Jim Prentice's government is heading toward a deficit that could top $7.5-billion in 2015-16.

Alberta's reversal of fortune can be attributed to low oil prices, which have dropped more than 50 per cent since August. The budget assumes an average barrel price of $79.24 (U.S.) over the fiscal year of 2014-15, which will be the case as long as the price for the remainder of the year averages $44.

Next year's deficit is expected to reflect not only a much lower oil price over all, but also its growing effect on other parts of the economy: fewer land sales, higher unemployment, less corporate tax revenue.

For months, Mr. Prentice had warned Alberta could finish the current fiscal year on March 31 with a $500-million deficit, as a sharp drop in oil prices hurt the government's bottom line. Bitumen royalties now are expected to drop by $644-million from the budget forecast of $5.6-billion, and the province expects to lose another 31,000 jobs before fiscal year's end.

Over all, revenues from all non-renewable resources, including natural gas and crude oil, will drop $503-million.

Mr. Prentice has already begun limited cuts, shuttering some of the province's diplomatic outposts and cutting MLA pay by 5 per cent. Mr. Campbell has said government departments could face 9-per-cent budget cuts in 2015-16.

"We have taken steps to protect our financial position that will help keep us in the black this year," Mr. Prentice said in a statement.

But part of the decrease in the surplus comes from the fact the government spent $802-million more than budgeted, critics were quick to point out. Mr. Prentice blamed negotiated settlements made by the Progressive Conservative government of his predecessor, Alison Redford, for the jump in spending, "including several compensation agreements reached after the release of Budget 2014."

The Wildrose Party Official Opposition said that, without the spending increase, the government would have met its surplus targets thanks to increased revenues from better-than-expected corporate tax receipts and higher investment income from the province's Heritage Fund.

"Instead of holding back spending …, this government has let Alberta's finances balloon out of control," said Wildrose finance critic Drew Barnes.

"We have the most expensive government in Canada," he said. "It's time for leaner, more efficient government."

Oil was hovering over $100 a barrel and the province's economy was growing quickly when the PC government led by Ms. Redford predicted a $1.1-billion surplus in the budget it tabled last March.

That surplus has been in doubt for months.

"What we see in the update is what we expected," said Ben Brunnen of the Canadian Association of Petroleum Producers. "The bigger impact is going to be felt in the coming year."

Mr. Brennen says capital investment in oil sands production has been cut by 30 per cent since the barrel price began to fall. He expects oil sands production to start to drop in 2016, even if prices rebound in the near future.

The price drop has stalled Alberta's economy and cooled the province's once red-hot housing market.

In the oil patch, there have been large cuts to new spending and companies have been laying off employees and announcing more job cuts. Alberta's economy is now expected to grow by only 0.6 per cent in 2015, barely keeping the province out of recession.

"The news isn't quite as bad as it could have been. The government's fiscal position is a wee bit brighter, but this doesn't change the overall mood in the province or the economy. It's still going to be a pretty rough year," said Todd Hirsch, the Calgary-based chief economist of ATB Financial.

"While forecasters are quibbling over tenths of a percentage point, whether there is a negative in front of that 0.6 per cent or not it will feel like a real slowdown."

The province will lose tens of thousands of jobs over the remainder of the fiscal year but that will still leave Alberta with a slim increase in employment due to strong job creation in earlier months, the government said.

Adding to Alberta's burden, 60,000 to 70,000 people are still expected to move to the province over the coming year. That's down from the 100,000 people Alberta added over the past year.

With Mr. Prentice taking aim at the province's contracts with public workers by calling them "unsustainable," the opposition parties have been critical of his approach to the province's precarious financial situation.

"The difficulties that Alberta faces are because the Conservative government has squandered the wealth of this province in the past," said Alberta NDP finance critic Brian Mason. "They've placed us in a very difficult position."