Vale of Glamorgan Council is still facing a funding gap of nearly £6.6 million next year despite a 'real terms' increase in funding.
Last week, council leader Lis Burnett said a "better than expected" settlement with the Welsh Government would mean a real-terms increase in funding "for the first time in a long while".
Opposition parties described the proposed council tax hike as "unacceptable" and "disappointing".
A report recommends a public consultation on the draft proposals, which reveal a funding gap of £6.58m for 2026-27 alone - and £34.86m across the next five years, which will met from savings and reshaping services.
For the next financial year, £3.81m of the funding gap is being met from the reduction in pension costs with £2.77m coming from “reshaping” and savings.
The report says an increasing proportion of the council’s resources year-on-year have been taken up by schools and social care. This was 68% in 2023/24, 70% in 2024/25 and rose to 71% for 2025/26.
But this trend has been paused in the forthcoming year due in large part to the reduction in employer pension contributions.
The council faces financial pressures of around £27.72m in the next 12 months and as much as £83.91m in the medium term, including 2026-27.
Last month, a £300 million deal between Labour minsters and Plaid Cymru in the Senedd saw the Vale's funding settlement increase from 2.5% to 4.5% as part of extra money for local government.
But the cabinet report states: "The additional resources, whilst appreciated, continue to fall short of what is needed to sustain essential local services."
"The settlement concentrates resources towards schools and social care. It is also underpinned by a notional increase in council tax based on the average across Wales for the past three years and that is in excess of the increase proposed in this report."
It adds that the overall position has benefited from the significant funding position for the Cardiff and Vale Pension Fund with the proposed reduction in the employers’ contribution reducing costs by £3.81m.
Cllr Ian Johnson, the leader of the Plaid Cymru group, said: "Plaid Cymru secured an additional £4.6m for the Vale of Glamorgan Council through the Welsh Government budget debate in December, so it is disappointing that Labour are still suggesting a 5.5% council tax increase, well above inflation."
“"As a responsible and constructive opposition, we will be scrutinising the budget over the next few weeks to see where we can stop increased costs, as well as protecting services from cuts."
“However, it’s important to recognise that many of the increased cost pressures faced by the council come from providing support to the most vulnerable, either Additional Learning Needs (ALN) support in schools or social care for older people in our society."
Away from the council chamber, former Welsh Conservative leader Andrew RT Davies claimed Vale workers were "paying the price" after Plaid "separatists" and Labour "both demanded an increase in welfare spending".
The South Wales Central MS said: "This also has consequences for local services. Residents are facing a council tax rise far higher than inflation, which the council claims is needed thanks to National Insurance rises."
"Plaid and Labour both insisted the two-child benefit cap had to go. Taxes are going up to pay for it, and this is impacting our whole economy. The council must also take responsibility for the inappropriate projects it prioritises."
"Putting resources towards a County of Sanctuary for asylum seekers and funding Stonewall diverts them from frontline services, placing further pressures on budgets."
A four-week consultation is due to be held on the draft budget, which will also be considered by a joint scrutiny committee and again by the cabinet before final decisions are made at a full council meeting in March.
Additional reporting by the Bro Radio Newsroom
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