Several schools in Walsall have threatened to opt out because they fear the council's radical plans to sack senior officers and "hand back power to the people" will bring them under the control of neighbourhood committees.
The sweeping proposals, unveiled earlier this month, are the idea of Dave Church, the Labour-controlled council leader, and his deputy John Rothery.
They have been described as the most exhaustive changes in local government this century and are said to have sparked concern at Labour's national headquarters - where stringent efforts are being made to rid the party of its "loony Left" image.
As part of the restructuring at Walsall all nine executive officers, including Mike Quinn, director of education, have been issued with redundancy notices and must reapply for their posts which are being redefined.
The new jobs include five "associate directors" for education, housing and social services, environmental services, resources, and contracts.
Central to the reorganisation is the creation of up to 55 "neighbourhood committees", made up of local representatives, which will buy in local services.
But no one at the council - including Mr Rothery - seems to know how members will be elected or exactly how wide the committee's powers will be. "It is whatever the appropriate level for making the decision is," he said.
Bruce George, Labour MP for Walsall South, savaged the proposals, saying: "A number of decisions have been taken which have irritated a lot of people in business, industry and not least those in education.
"Heads have told me they've resisted GM status when it was easily available because they were committed to the local authority. They are fearful of what will happen to them if they are controlled by a neighbourhood council.
"I am not opposed to change but it needs consultation. It is very dangerous for a single local authority to try to rewrite local government. They seem to be going out of their way to get right up people's noses."
Ian Crosland, general secretary of the Walsall branch of the National Association of Schoolmasters Union of Women Teachers, said: "We have no clear idea of the extent of the power to be delegated to the neighbourhood committees, how the policy will impact on schools, their budgets, and the services offered by officers.
"We don't want a system which will drive schools into opting out and several have mentioned this already - though we feel sure it is simply a knee-jerk reaction."
John Rothery defended the scheme saying: "What we are trying to do is to devolve powers down to a neighbourhood level. The impact upon schools will be nil.
"The neighbourhood committees will receive funding for schools in their area but it will pass on to the schools untouched."
David Winchurch, the borough's chief executive, said that some executive officers' redundancies were likely but the authority would attempt to redeploy as many as possible.
The newly created associate director posts would be advertised in the national press next week and again at the end of August. The new appointments will start at the end of September; existing chief officers will remain in their jobs for the next three months.
However, Mr Winchurch admitted morale at the civic offices had suffered: "If you serve anyone with redundancy notices it doesn't do much for their morale. "