Insufficient reserves to cover a current education overspend of more than £4m have prompted the need for a recovery plan from Central Bedfordshire Council.
And the figure could reach as high as £6m by the end of the financial year, the council's schools panel (Jan 12) was warned.
At least five local authorities experienced an overspend of £20 to 30m on their dedicated school grant (DSG) last year, when CBC overspent it by £1.876m, according to a report to the panel.
"There will be insufficient reserves to cover this year's overspend and it will be carried forward into future years," said the report.
"Such overspends cannot be mitigated by the general fund, which is why a recovery plan is required."
Assistant director education Peter Fraser told the panel: "We've seen a significant increase in demand for educational health and care needs assessments.
"That's resulted in extra children with educational health and care plans (EHCPs) with a knock-on impact over the provision of the places for young people," he explained.
"And then that has an effect on the budget. In the last paper, we forecast a £2.9m overspend. Now it's looking like a £4.3m overspend, with a worse case scenario of as high as £6m by the end of the year.
"But we're doing everything we can to mitigate that, obviously. And we've seen a significant swing since September with another £1m now to out of county placements."
CBC has 61 pre-16 children in independent provision, with an average cost of £52,058 ranging from £8,000 to £268,000, added the report.
"The number of CBC maintained EHCPs for pupils in reception to year 14 in autumn 2021 was more than 2,100.
"The forecasts are for an extra 900 by January 2025 (or 40 per cent higher), and an additional 400 by January 2030 (a further 13 per cent more)."
Mr Fraser said: "We've also seen a big swing in the amount of money being provided to special schools and top-up small schools because of the increasing demand. All this money is going on meeting children's needs.
"That's the most important thing, that we're responding to demand and putting the finance where it's needed to make sure children receive the best possible start.
"It's a national problem. We know it's very much on the radar of the Department for Education.
"We're lobbying government along with a number of other local authorities to improve funding levels for the higher needs block, and we got notification today of a small increase.
"We've to put in place a recovery plan for the higher needs block because we can't overspend on the complete DSG, so this is one of the four blocks within that.
"This will be the first year we can't meet this overspend from our contingency budgets.
"It'll be the first time this budget goes into deficit, and we'll need to submit a recovery plan," he added.
"We've invested hugely in capital programmes to generate extra places, which still need to be funded to support children.
"We've done a review of the single value top-up we provide to special schools and we'll start rolling that out.
"We're looking at the extra funding we give to all schools and how we fund alternative resource provisions. That's part of the recovery plan."