Rutland, which becomes a unitary authority on April 1, is getting more than Pounds 1 million less from the Goverment for education than Leicestershire County Council spent on the area's schools when it was responsible for them.
Heads face a 2 per cent budget cut, spending on youth and community education is set to halve, school meals are to be axed, and post-16 transport subsidies reduced while those for eight to 11-year-olds will be pared to a statutory minimum.
Education director Keith Bartley - one of just two permanent full-time staff in the education department - has had to get rid of five posts from his central administration team.
"It is a dreadful position from which to set up a new local authority, " he said.
Rutland has only 17 schools, all primary, where there will almost certainly be teacher redundancies. The three secondary schools in the authority have opted out and their funding has been protected.
The budget for the authority has been capped at Pounds 23.4m when it claims it needs Pounds 26m. In January, the education committee agreed a budget of Pounds 11.7m. Last week, the council said it could have Pounds 11.1m.
"We are starting off with a budget position that means services are having to be reduced before they have even been developed under Rutland management, " said Mr Bartley.
Rutland is a small, rural authority, with no high-density areas. The home-to-school transport bill for the 4,900 pupils under Leicestershire County Council was almost Pounds 500,000.