THE region will have to dig deep this coming financial year.
South Burnett Regional Council is facing a $508,000 deficit instead of a surplus of $1.68million it originally forecast.
The council's finance portfolio spokesman, councillor Keith Campbell, said he didn't think in his "wildest dreams" the council's budget would deteriorate in the way it has.
He said the result was significantly down from the September forecast of a $1.68million surplus.
Cr Campbell said after the impact of the flood damage restoration works was removed and funds carried forward from 2011/12 were taken into account, the deficit would stand at $500,000.
"The shocks this council has endured in the past few months have had devastating effects on our budget," he said.
"We have lost $1.2million in funding from the Regional Road Grants and more recently we lost $180,000 from the Federal Assistance Grants.
"Having money from revenue like this stripped from council has put us in a challenging position and has come as a real financial shock."
Cr Campbell said the council would have to make a number of tough decisions as they begin discussions about the 2013/14 financial year.
Cr Kathy Duff said she was disappointed the Federal Government could "pull funding with no warning".
"Their decision to strip us of funding has put us in a situation where we can no longer balance the books," she said.
"It's going to be hard for us to operate knowing (this) coming into a new budget."
Cr Damien Tessmann said it was "bloody disgraceful" the council was now back where it started almost five years ago because of government funding cuts.
But he said the council would rise to the challenge.
Cr Barry Green said he was concerned about how ratepayers would have the capability to cope with more rate rises.
He said it would be "almost impossible" to reach revenue without increases in rates.
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