A Derbyshire district must make some 45 staff redundant to help meet a huge budget shortfall caused by the concessionary bus fares scheme.
Chesterfield BC was about £1.6m adrift last year and faces a similar gap in 2009-10 on a revenue budget of £14.9m.
Chief executive Huw Bowen said it had to divert efficiency savings earmarked for invest-to-save projects into keeping its services running.
“It is very frustrating,” he said. “We have done everything the government has asked by making three times the efficiency savings demanded yet we have been hit by this. We are trying to make as many redundancies voluntary as possible.”
Mr Bowen said Chesterfield suffered because it is a regional transport hub, used for shopping and hospital visits. Councils must meet the costs of all journeys made in their area, whether or not by residents.
It was among councils whose plight was highlighted by the Local Government Association.
Others facing shortfalls of more than £1m included Cambridge, Derby, Exeter, Norwich, Nottingham, Oxford and Preston city councils
The government is consulting on shifting the scheme from district to county level, arguing that this would remove anomalies that have hit districts in major retail and tourism areas.
LGA regeneration and transport board chair David Sparks (Lab) said that unless the scheme was fully funded this change would merely shift the problem elsewhere.
- Association of Transport Coordinating Officers has called for the scheme to be removed from local government and run nationally.