SASKATCHEWAN (CBC) - For days, the Saskatchewan government has been forecasting bad news in its mid-year financial update, and on Thursday the public found out just how bad.

The mid-year update released by Finance Minister Rod Gantefoer shows government revenues and the provincial economy are shrinking, although the gross domestic product is expected to grow next year.

The government forecasts it will end up with a $424 million surplus this year, but only after digging deeply into its so-called rainy day fund and using more money from a company it has sold off.

Potash revenues were projected to total $1.9 billion when the spring budget was introduced, a number that was slashed in the summer to about $675 million. Now, the projection has been slashed again, to $109 million.

That's a 95 per cent drop since the spring.

"The lesson we've learned from this experience is we have to be more cautious and more prudent than we've been in the past," Gantefoer said.

However, NDP finance critic Trent Wotherspoon said the real lesson is that the public can't trust Gantefoer, or Premier Brad Wall.

"We have an unprecedented error and a case for mismanagement that's going to cause huge concern for the Saskatchewan people and has a price for generations to come," Wotherspoon said.

To cope with that $1.8 billion drop in projected potash revenues, Gantefoer is pulling out all the stops.

The government is deferring $122 million in spending that had been earmarked for new long-term care facilities.

It's also taking $564 million from its rainy day fund, formally known as the Growth and Financial Security Fund. In the spring, the government said it would be taking only $9 million from the fund.

The province has also downgraded its projections on the state of the provincial economy.

In the budget, it was projecting real growth in the economy this year would be 2.1 per cent.

Now, it's saying the Saskatchewan gross domestic product will decline by 2.9 per cent. Next year, the economy is expected to grow by 2.4 per cent, however.

To stay in the black, the province is also taking a bigger chunk of cash from the sale last year of the Saskferco fertilizer plant.

The provincial government received about $750 million for its 49 per cent share, with the money earmarked for debt reduction and infrastructure.

Now, it's taking about $560 million from that sale into this year's general revenues.

The government says it will continue to hold about $195 million from the Saskferco sale for use in future years for the Saskatoon children's hospital project.