Dumfries and Galloway Council is facing a £13 million black hole next year.
And it needs to cut nearly £40 million from its budget over the next three years, with council tax increases and service reductions likely.
The figures are outlined in a report for members by finance and accounting manager Gillian Ross.
When the Scottish Government published its budget for 2023/24, deputy First Minister John Swinney said he had allocated an extra £570 million to local authorities.
However, the The Convention of Scottish Local Authorities (COSLA) claimed its a real terms increase of just £71 million.
And in her report for members of the finance, procurement and transformation committee, Ms Ross states that Dumfries and Galloway’s share of the extra £71 million is £1.9 million – a “like for like” increase of little more than 0.5 per cent.
The report reveals that in 2023/24 the council needs to make £12.989 million of savings, with an indicative savings target of £39.689 million by the end of 2025/26.
Ms Ross says there is “limited” impact council tax increases can have as it “only contributes less than 17 per cent of the council’s overall income”.
She adds: “A combination of both council tax increases and service reductions will therefore require to be identified by councils in order to balance the budgets”.
Council tax increases are likely, with every one per cent increase generating an extra £805,000.
The report notes that the Band D rate is seven per cent below the national average, meaning the local authority is missing out on £5.6 million a year.
Ms Ross says; “Previous public consultations have consistently indicated an appetite to increase council tax if it supports/protects necessary services and members may therefore wish to review the level of council tax increase to be considered in conjunction with savings options and investment proposals.”
Other options include extending the repayment period for some public private partnership (PPP) projects and a “change and savings programme”.
The report concludes that local councils “face an extremely difficult challenge” in the coming years, with Dumfries and Galloway in a “relatively strong financial position in large part to the prudent approach consistently taken by members when setting budgets”.
