A district of Northamptonshire with a population of about 86,000 is to lose government grants of more than £1m.
East Northamptonshire Council has revealed funding cuts and a fall in interest rates will create a total budget deficit of £2.7m next year.
Recovering that deficit through cuts will not be easy for a mainly rural authority its size, a spokesman said.
The council will also have to save a further £600,000 the following year because of more government cuts.
Council leader Steven North says the loss in revenue from the government will "inevitably impact on some services" but no decisions have yet been made about what to cut.
He said they have been reviewing the corporate plan and their priorities but they want to "protect their front-line services as far as possible".
Meetings will take place before and after Christmas, with the final decisions made at the end of February.