Premier Jim Prentice made one of his most dire assessments yet on Friday about the impact of dropping oil prices on Alberta finances.

“The circumstances that we're in are the most serious financial circumstances we have seen in this province in 25 years, if not fifty, and certainly they will affect every Albertan,” he said at a news conference in Calgary on Friday.

Prentice’s remarks came one day after he told the Canadian Press that the province is forecasted to end the fiscal year with a $500 million deficit.

About 20 per cent of Alberta revenues comes from resource royalties. Over the last 90 to 120 days, revenues have dropped from $9 billion to under $4 billion, Prentice said Friday.

If oil prices stay at $50 or less for the next year, the province will take a $10 billion financial hit, he said.

Prentice is chairing a cabinet committee which is examining options for the upcoming budget. He said the capital plan is under review “project by project.”

He said the government needs to demonstrate that spending is being kept in check.

“We also need to deal with the revenue income of the government and we also need to judge how and to what extent it's appropriate to have deficits over the next 3 years,” he said.

Despite this gloomy outlook, Finance Minister Robin Campbell told CBC News it’s still too early to expect the cuts of the Ralph Klein era.

“We run a pretty slim public service now,” he said.

“We have to make sure that we keep our essential services in place and our front line workers are paramount to that being done. So I don't want to get into the situation where we were in the Klein years."

Campbell plans to meet with union officials soon about the situation. The budget is expected to be tabled in March.