The Scottish Government has told Moray Council to take lessons from local authorities in other parts of the country to plug the gaps in its finances.
Senior officials and elected members have admitted they are having to “think outside the box” to make savings of £12million over the next two years.
Residents were even asked to comment on the potential for building a school for all 12,000 pupils in the region as part of consultation on cost-cutting.
Council leader Stewart Cree held showdown talks with Finance Secretary Derek Mackay and warned the local authority was in such a perilous position it could be facing bankruptcy by April 2018.
Councillor Cree said: “I am confident that the minister will reflect on the case which we presented to him, and will seek to persuade his Cabinet colleagues that without a change of thinking from the Scottish Government, there will be drastic cuts in local provision.
“These would have long-term consequences for many families and communities.
“The minister has asked to be kept informed of any progress in our budget-setting process, and for us to research how many other councils were facing the same degree of financial challenge.”
If the council’s reserve funds run dry in 2018 the authority would not be able to dip into a pot set aside for unforeseen events, such as emergency relief following floods.
The council’s corporate director, Mark Palmer, joined Mr Cree for the talks in Edinburgh.
A Scottish Government spokeswoman said: “This was a constructive meeting, during which the finance secretary reiterated the fact that – despite ongoing cuts to our budget by the UK Government – the Scottish Government has always treated local government fairly.
“As part of the 2016-17 funding settlement for local government which amounted to over £10.3billion we provided Moray Council with their fair share, which amounts to over £164.7million.”