Premier Rachel Notley pledged that Alberta will "lead again," despite the economic challenges it's facing now, in a major speech on Wednesday.

"We've taken some hard economic knocks from the international price of oil, but nobody knocks Alberta down for long," the premier said in her state of the province address, delivered to an audience at Calgary's Jack Singer Concert Hall.

"We're getting back on our feet."

Staring down a $10-billion deficit and sagging public support, Notley said her government won't cut health or education but spending in other areas will be contained.

"We can handle the current dramatic drop in government revenue — for a time," she said.

"But as our economy improves in coming years, the provincial budget is going to have to come back into balance. That means we can protect health care and education … but that also means we are very unlikely to have headroom for major new spending proposals until recovery arrives."

The crash in oil and natural gas prices has ripped a gaping hole in the government's budget. Ten years ago, the province derived more than 40 per cent of its revenue from royalties and other income from non-renewable resources. Last year, it was less than six per cent.

Wildrose energy critic Leela Aheer, speaking after Notley's address, said the NDP government has worsened an economy already hurting from the oil crisis with policies such as 'minimum wage and carbon taxes and all these other things.' (CBC)

Still, Notley reiterated her government's pledge to not slash its way out of deficit.

"Firing nurses and teachers ... will not make the price of oil go back up," she said.

"It makes no sense to try to deal with a crisis in the price of oil by creating a second crisis in basic public services like health and education. That was tried in the past, and it failed."

Expect 'stability' in funding, but not increases

The premier said stability is the "watchword" for the coming budgets in Alberta.

"That means that people providing public services funded by the provincial government need to find innovative ways to do more with the funding they have now," she said.

"That means that municipal leaders need to understand that exciting new proposals will probably need to be paid for by reallocations — starting a new project might mean ending an old project."

That last sentence will catch the attention of civic leaders in Calgary, who have been calling on the province to contribute its share to the Green Line, a planned multi-billion LRT expansion to which both the federal and municipal governments have pledged $1.5 billion.

Alberta Party Leader Greg Clark said Notley's speech framed the province's problems in a 'false polarization' by suggesting the only choices were 'massive debt and deficit' or 'massive cutbacks' to health and education. (CBC)

Opposition slams NDP policies

Wildrose energy critic Leela Aheer said that, regardless of the impact of oil prices on the province's economy, the government has taken steps to make things worse.

"When we're talking about stability, you have to consider the factors of policy," she said.

"We're looking at policies that are hurting Albertans right now … minimum wage and carbon taxes and all these other things that we've been talking about that are so impactful on Albertans right now."

Alberta's minimum wage rose to $12.20 an hour on Oct. 1, the highest among the provinces, and the government plans to increase it to $15 an hour by 2018.

Alberta also plans to introduce a $20-per-tonne carbon tax in 2017 that includes offsetting rebates to middle- and low-income households.

The tax is to grow to $30 per tonne in 2018, with a corresponding increase in the rebates.

Alberta Party Leader Greg Clark, meanwhile, said Notley's speech framed Alberta's problems in a dichotomy that doesn't exist in reality.

"She's creating what I believe is a false polarization, telling Albertans the only choice you have is massive debt and deficit on one hand – which is what this government is doing – or massive cutbacks on the front lines to health and education," he said.

"There is a better way. There is a middle way that we can pursue."

The Alberta Party wants to see public sector salaries frozen and Alberta's relatively high per-capita spending gradually brought down to the national average.

About 600 people gathered in the lobby area outside Calgary's Jack Singer Concert Hall for Premier Rachel Notley's state of the province address. (Bryan Labby/CBC)

Commitment to combating climate change

Notley, for her part, said the carbon tax is not only a way to combat climate change but also continued to suggest the policy would help Alberta develop the so-called "social licence" to get pipelines built.

The premier blamed previous governments' inaction on reducing carbon emissions for the opposition Alberta has faced in attempts to pipe oil to tidewater.

"On few files was our province more poorly served than by elected officials from this province who claimed — with a straight face — there was no need to act decisively or effectively on climate change," she said.

"This failure to attend to the fundamental strategic interests of Alberta is a key reason why we remain landlocked today, despite 10 years of promises that the issue was going to be addressed effectively. So let there be no doubt. If we want a better economic future, we need to lead on climate change."

Anxious Albertans

Albertans, in general, are feeling anxious these days — a recent CBC/Angus Reid poll confirmed as much — and the premier needed to take that into account in her speech, according to Janet Brown, an independent pollster based in Calgary.

Despite an ambitious and wide-ranging agenda that includes combating climate change and introducing new transgender policies in Alberta's schools, Brown said Notley has to show the government hasn't lost sight of what's first and foremost on many people's minds.

"I think what the public wants to hear from the premier is that she's very focused on the economy, she's focused on jobs," Brown said before Notley spoke.

"She has some other priorities like the environment, but I think Albertans want to know ... that she's carefully thinking through all of her policies to ensure that they won't undermine any possible recovery."

As Notley delivered her speech, oil prices hit a 15-month high, continuing a trend that began in late September when OPEC reached an agreement in principle to begin limiting production again.

Even before the OPEC announcement, two major Canadian banks predicted Alberta's economy would bounce out of recession in 2017, with one even forecasting it would lead all provinces in GDP growth.

But the premier was cautious to say the worst is behind Alberta.

"I think it's a bit premature to say that," she told reporters after her speech.

"We're still very much tied to the price of oil. We're still looking at what the pace of investment in capital expenditure will be in the years to come, and I don't think we can entirely predict that yet. So, we're cautiously optimistic but we're still planning to manage as though things have not started to improve, because I think that's the prudent way to go."