Hyndburn Council is facing a cash gap of more than £5million by March 31 2028 even with maximum increases in its part of the council tax.
The figure was revealed by the authority's finance boss Cllr Vanessa Alexander, to its Cabinet on Wednesday.
She said that the projected deficit in Hyndburn Council's deficit for 2026/27 was £2.4m and the cumulative for 2027/28 was £5.2m.
This would rise to £8.1m if the borough had not yet been taken into a larger post-Lancashire devolution unitary authority, as indicated by the government.
Cllr Alexander set out the council's financial position in a report on its Medium Term Financial Strategy (MTFS).
She said she was not seeking to indulge in 'scaremongering' but providing the figures needed for Cabinet to make its decisions for the coming financial years.
Her report said: "The MTFS figures are based on the assumptions set out in the report presented to Cabinet on September 10, including the following:
" · increases in sales, fees and charges income of three per cent;
"· decrease in non-ringfenced government grant income in line with the expected fair funding review outcomes.
"· retained business rates income frozen; and
"· Increase in council tax base of 0.66 per cent with a 2.99 per cent increase in council tax rate."
If the 2.99 per cent council tax increase for 2026/27 goes ahead it would see the current annual bill for Hyndburn's portion for a Band A terraced house rise from this year's £ 184.31 to £189.82 and for a Band D family semi-detached homes from £276.46 to £284.73.
The bill would also include a much larger precept from Lancashire County Council and extra fees for the police and fire and rescue services.
Cllr Alexander said: "I believe we can deal with this, as we have done in the past, without any cut in services to the public or any staff redundancies.
"We will be able to set a balanced budget for 2026/27."
Her report said of the government's proposed Fair Funding Reform: "It has indicated that most councils will be protected by the flat cash floor, but around 49 councils, including Hyndburn, may face larger reductions of between minus five and minus seven per cent.
"Current information suggests that Hyndburn's Core Spending Power could fall by between five and seven per cent in year one, followed by flat funding in years two and three."