UPDATE 2-Alberta expects first deficit in 15 years

* Sees C$1 billion deficit this year * May have to dip into emergency fund next year * Expects to shed 15,000 jobs this year * Sees provincial economy shrinking 2 pct (Recasts)

CALGARY, Alberta, Feb 19 (Reuters) - Canada’s energy-rich province of Alberta is expected to report its first budget deficit in 15 years this fiscal year, racking up more than C$1 billion ($800 million) in red ink as the value of its savings fund sinks.

Provincial Finance Minister Iris Evans said the province will report a balanced operating budget, with revenues equalling expenses for 2008-09.

However, accounting for a 15 percent drop in the value of the province’s Heritage Fund, whose worth was last pegged at C$15.8 billion at the end of September, will push Alberta into a deficit, a spokesman for the minister said.

“We’re losing money on the Heritage Fund,” said Bart Johnson, a spokesman for the minister. “It’s kind of a booking thing on the revenue side ... Our investment income is negative.”

Alberta has Canada’s most robust public finances, largely because of hefty contributions from oil and gas production, and it is debt free.

The province last posted a deficit in 1994 but Evans said she expects Alberta’s economy to shrink by 2 percent in 2009, as investment in the oil sands and other industrial sectors dries up.

Plunging oil and gas prices have forced the provincial government to backtrack on a forecast budget surplus, pegged in November at C$2 billion, for the fiscal year ending March 31.

Evans said that, despite investment losses from the Heritage Fund, she expects to see about equal revenues and expenses for the year.

“We expect them to balance,” she said on a conference call, adding that money that was budgeted but not spent in the 2007-08 budget would help make up for the investment losses.

She also warned that the next year could be difficult. If revenues don’t rise, and the province may have to dip into its savings to make ends meet.

“There’s going to be some difficulty and we have to balance our budget one way or another,” she said. “If we end up dipping into our emergency savings then, obviously, technically that’s a deficit.”

Alberta’s revenues have been buoyed by heavy investment in developing the massive oil sands, creating thousands of jobs and labor shortages in much of the province.

However more than C$90 billion worth of new projects in the Florida-sized oil sands region of northern Alberta have been delayed, deferred or canceled since oil prices began plunging last year.

Now, instead of being short of workers, Evans said Alberta is expected to shed 15,000 jobs this year, pushing the unemployment rate to an expected 5.8 percent, from an average of 3.6 percent in 2008.

Evans said she expected to offer more concrete data next week, when the province releases its third-quarter budget update.

$1=$1.25 Canadian Reporting by Scott Haggett; editing by Rob Wilson