The mid-year financial update released by the government Tuesday forecasts a $12.4 million surplus. It's a big drop from the spring budget which initially estimated a $95 million surplus.
"The decrease in the price of a barrel of oil has been significant. It's very volatile," said Saskatchewan Finance Minister Ken Krawetz.
"I mean when we see $3 and $4 fluctuations, up and down from day-to-day, no one I think could project that. We don't know what will be the result. Our projections today, I think, are based on very cautious numbers."
Overall revenue is projected at $11.2 billion — down $51 million from budget. Potash revenue dropped by $239.8 million and oil is down $164.6 million.
Krawetz said despite a significant downturn in resource revenue, the budget remains balanced because of growth in other parts of the economy.
The mid-year report says individual income tax is up $167.7 million, there is more revenue from a larger than expected crop in 2012 and ministries have been tightening their belts to find $61.2 million in savings.
But the province also got a big boost with a one-time, $123 million resource surcharge that came from adopting new federal income tax rules.
Krawetz acknowledged the province could have been in trouble without that money.
"There would be other things that we would be looking at in terms of expense management, absolutely. That's the benefit of mid-year projection. We're able to look at all of the sources that provide additional dollars and we're able to look at where we can adjust our expenditures," he said.
"In this case, the $123 million is a one-time partnership adjustment and we recognize that and that's why there will be challenges for the financial planning for 2013-2014 and beyond."
Warren Lovely, with CIBC World Markets, said the update shows Saskatchewan's economy continues to power ahead.
There is pressure on resource revenue, but the real gross domestic product growth outlook is even brighter than in March, he said.
"Within Canada, Saskatchewan remains a growth leader. The province now expects real GDP to grow by 3.1 per cent this year, in line with the private sector consensus and up from the 2.8 per cent projection in the March budget," he wrote.
"For the current year, the improved tone to real GDP growth captures sturdy domestic demand. Job creation, population growth, consumer spending and investment activity (both residential and non-residential) remains buoyant, and the province boasts top marks across a host of provincial economic indicators.
"Consistent with its relative economic out-performance, Saskatchewan maintains a healthier budgetary position than other provinces," he added.
The budget was also balanced on what is called a summary financial basis, which takes into account all areas of government including Crown corporations.
But the Opposition NDP said the budget update is off track.
New Democrat Trent Wotherspoon said the resource revenue projections have been a concern "from day one."
"Unfortunately, that seems to be a reality that they were overly optimistic," said Wotherspoon. "We still have some concern that maybe we should be more cautious than we are here at mid-year."