*story updated at 2:00 pm, July 9, 2009

VANCOUVER - British Columbia posted a $78 million budget surplus for 2008/2009, Finance Minister Colin Hansen announced today.

This is despite a drop in total revenue of $1.5 billion compared to last year. Personal income tax revenues dropped by $863 million; corporate tax revenues by $212 million; and social services tax revenues by $114 million.

Natural resource revenues increased, however, to $70 million, largely due to the natural gas sector. In 2008, land lease sales were going for $655 per acre in northeastern B.C., and the sale of six drilling licenses attracted bids of more than $67 million.

"Last year's economic environment required prudent fiscal management to maintain a balanced budget," stated Hansen in a press release. "The sharp revenue declines we experienced underscore the need for continued vigilance to ensure we can continue to deliver the vital services British Columbians depend on while keeping our program spending sustainable."

It remains to be seen how the province will sustain spending in the face of at least a $495-million deficit, but it will require tax hikes, spending cuts or a combination of both. At last month's cabinet swearing-in, Minister Hansen has previously insisted the deficit would not grow, but today told reporters that he is no longer confident that the province can meet that target.

The province will release its revised budget for this fiscal year in September.

Colleen Kimmett reports for The Tyee.