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Faced with plunging revenues from its struggling mainstay, the oil and gas sector, the Alberta government is saddling itself with another blockbuster deficit as it moves to increase spending in a time of continued financial hardship.

The province has detailed plans for a record $4.7-billion deficit for fiscal 2010-2011 as it augments spending on health care and education without raising taxes.

Alberta's budgetary forecasts provide an early look at the difficult decisions facing other provinces and the federal government. Though the Canadian economy shows glimmers of a recovery, Ottawa has signalled it will usher in a period of fiscal austerity after its second round of stimulus funding is injected into the system this year.

The problem facing all levels of government is both economic and political, as leaders grapple over whether they should fall into larger deficits or stage a dramatic response to shrunken revenues.

"These are difficult times, and difficult times call for difficult choices," Alberta Finance Minister Ted Morton said yesterday.

But in a place accustomed to a wildfire economy and annual windfalls, provincial politicians have discovered that weaning themselves from spending has proven the most difficult choice of all.

That has been especially true as the ruling Conservative Party finds its tenure on shaky ground in the face of both higher unemployment figures and a potent political threat from the nascent Wildrose Alliance Party.

Mr. Morton was unapologetic about the province's 5.6 per cent growth in operating expenses, which will be covered by a modest $423-million revenue increase and a raid on the savings Alberta accumulated in the years of surging oil and gas prices.

Over the next three years, the province will drain $12.2-billion from its rainy-day Sustainability Fund, leaving it nearly $3-billion in debt.

That contradicts warnings from both the province itself, which cautioned that belt-tightening was in order, and calls from fiscal conservatives, who want Alberta to cut annual spending by billions of dollars to have it fall more in line with other provinces.

"A lot of people want to have it both ways: stay out of deficit but don't make cuts," said Mr. Morton, a noted fiscal conservative, as he defended what could be a record deficit for the province.

"I can tell you, you can't have it both ways. We've chosen to make cuts in some areas and increase spending on others to protect essential services."

But the numbers make it clear that the province has opted for spending over cutting, a fact opposition parties seized on.

"We're racking up debt, we're blowing through our savings," said Wildrose Leader Danielle Smith, who accused the government of crossing its fingers in hopes that "oil and gas prices recover so they don't have to do anything.

"I think Minister Morton has lost a lot of credibility today by putting his name to this train wreck," she said.

Rather than lop $2-billion from spending, as it pledged to do last year, the province managed to trim $1.3-billion and 795 jobs.

And rather than use those savings to reduce its deficit, it instead raised total spending by $1.7-billion, most of it going to a massive health budget increase.

Even with an unexpected $1.6-billion gain from its investments - primarily from a huge rally in its energy savings kitty, the Heritage Fund - Alberta now expects to post $3.6-billion in red ink in the current fiscal year.

The $4.7-million deficit for 2011-2011 is nearly double what the province had previously forecast.

"See if Albertans support longer waiting lists, no roads, 60 people in the classroom," said Treasury Board President Lloyd Snelgrove, as he defended the higher spending.

Still, while Alberta political critics attacked the budget from all sides - the Wildrose for its profligacy, the NDP for its thrift - public policy experts lauded the government for a restrained, "stand pat" approach in the face of extraordinary economic change.

"In my view, having very large cuts at the time when the economy is not doing well is not particularly smart," said Jack Mintz, who leads the University of Calgary's school of policy studies and criticized previous Alberta administrations for exaggerating the effects of booms and busts with their spending decisions.

"There's a real need to create some more stability in the face of very volatile revenues," he said.

Yet the deficit forecast may also prove to be optimistic, since the province's numbers don't take into account changes Alberta is considering to its royalty formula.

Alberta is standing by its forecast return to budget surpluses in three years, although that is based on the assumption that oil sands production will grow faster than industry expects and that wages will climb at an extraordinary pace.

Alberta is the second province to reveal its economic outlook after New Brunswick, which forecast a record $754-million deficit in December. The federal budget is slated for March 4.