CALGARY, Alberta (Reuters) - The oil-rich Canadian province of Alberta, one of the largest oil exporters to the United States, predicted its fourth-straight deficit on Thursday as it increased funding for health and education, even as revenues rose as it recovered from the recession.
The western province, which had recorded 14 straight budget surpluses until falling energy prices in late 2008 slashed its take from oil and gas production, expects to post a C$3.4 billion ($3.47 billion) deficit in the 2011-2012 fiscal year that begins April 1.
It said its deficit for the current fiscal year will be C$4.8 billion, down from the C$5 billion forecast in November.
The budget is the last under Alberta Premier Ed Stelmach, who said last month he would not run for re-election, just three years after winning the largest parliamentary majority in the province's history.
Polls show Stelmach's government faces a challenge from the Wildrose Alliance, which positioned itself to the right of the his Progressive Conservatives.
Lloyd Snelgrove, the province's finance minister, said the economy may grow 3.3 percent in 2011, followed by average growth of 3.2 percent over the following three years.
The province expects said the lower deficit will come as revenue rises 4.7 percent to C$34.6 billion, while expenses will climb 0.5 percent to C$38.99 billion.
Alberta expects its income from the oil and gas industry to rise 4 percent to C$8.3 billion, as its takes in more royalties from the booming oil sands sector. It expects that take to grow to C$11.9 billion by fiscal 2013-2014 as new projects in the oil sands region are completed.
The government expects oil prices to average $89.40 a barrel in the next fiscal year while Alberta natural gas prices are forecast at C$3.45 per gigajoule.
Stelmach maintained spending on health, education and infrastructure during the recession, even as some members of his party advocated slashing expenses.
The latest budget sees a 6 percent boost for health, while support for the province's school boards is to climb 4.7 percent.
the province expects to return to a budget surplus in 2013-2014.
Reporting by Scott Haggett; editing by Rob Wilson