Following the second financial quarter of the year, Powys County Council is set to report a predicted surplus of £2.85 million at the end of March 2024.
This is £880,000 less than the surplus position of £3.73 million that was being reported at the end of June.
This is against its base budget of £326.621 million for 2023/2024.
The report will be presented to councillors at a meeting of the Finance Panel on Monday, November 13 for discussion, ahead of a Cabinet meeting later this month.
The report explains that the cause of the “deterioration” of the position over the summer is down to an expected “significant increase of employee costs.”
This is down to the Welsh Government agreeing to increase the pay offer for teachers and headteachers by five per cent from September.
The report said: “The budget set by council back in March is not sufficient to meet our actual salary costs with the councils forecast surplus position reported in September 2023 now being eroded as a consequence.
“Whilst the council is managing its budget position this year, we cannot underestimate the challenge the council faces in maintaining a balanced budget next year and over the medium term.
“Inflation and increased demand continue to create pressure on our finances.”
The report adds that the Welsh Local Government Association (WLGA) umbrella organisation for all 22 local authorities in Wales has described the situation as “extremely bleak.”
The report goes on to explain that the biggest change in recent months has come in Children’s Social Services with a predicted overspend rising to £853,000.
The report said: “This is due to the increase in demand for placements for children with complex needs, where there is a current national shortage, also we have received an increase in the number of Unaccompanied Asylum-Seeking Children.”
The council say the service is trying to find ways to reduce the budget pressure.
Head of finance, Jane Thomas said: “Local authorities across Wales will face impossible decisions as they set their budgets for the coming years.
"The council is managing its in year position."
Ms Thomas explains that a number of inter council budged transfers known as “virements” will need to be agreed at Cabinet level to “realign pay budgets” will strengthen the council’s position.
As part of the budget £16.5 million of cuts and savings need to be delivered this year.
The report explains that £10.8 million or 62 per cent has been delivered and a further £5.7 million or 33 per cent is expected by the end of next March.
Ms Thomas said: “Heads of service provided assurance that a further £5.7 million can be achieved by year end, £886,000 remains at risk of delivery and it is essential that those services consider what remedial action they take to mitigate the impact and deliver a balanced position.”
Ms Thomas adds that the “sustainable Powys programme” of re-organising council services will be “fundamental” in addressing future financial issues which include a £16.3 million budget gap predicted for next year – which is part of a predicted £43.4 million gap that needs plugging by March 2029.