Vale of Glamorgan Council will get an extra £7.3 million from the Welsh Government under its draft budget plans for next year.
The local authority is in line for a 3.4% increase in funding under its annual settlement.
But the council's leader, Lis Burnett, says the extra cash won't solve the problem of "significant financial difficulties" facing the Vale and other local councils in Wales.
She warned they will not be able to maintain all of their services at current levels.
Cllr Burnett said: "Today’s news is welcome as the council will receive more money than we anticipated."
"I’d like to thank colleagues in Welsh and UK Governments for recognising the significant financial difficulties local authorities are experiencing and acting to improve the picture both through today’s settlement and in the Chancellor’s autumn budget."
"However, this alone will not solve the problem and there is no disguising the fact that we remain in an extremely challenging financial position caused by rising costs and consistent real-terms funding cuts over the last decade."
"The settlement still leaves us needing to make significant savings to balance the books, a task that would be harder without the action we have already taken."
"High energy prices, inflation and interest rates are contributing to the situation, as are costs associated with growing demand for social care and provision for school pupils with Additional Learning Needs (ALNs)."
"What will always be an absolute priority is looking after our most vulnerable residents and protecting the services on which they rely."
"Next year 70 per cent of the budget will be spent on education and social care, up from 68 per cent last year, with that share set to rise again in future. Clearly that leaves very little left for the range of other services the council provides."
"Though the obstacles facing us are huge, this is a situation we have long been preparing for, one that senior offices have been working to address for many months."
"The council has an ambitious transformation agenda that we are confident will bring efficiency savings across the organisation, while changes to council tax and the careful use of reserve funds can also help bridge the gap."
"Even so, this is an extremely testing situation that will mean further difficult and unpalatable decisions lie ahead as it is a simple fact that we will not be able to maintain all services at current levels with fewer resources."
The council says it has working groups looking at where potential cost savings could be made ahead of its budget proposals next month - with a final decision expected at a full council meeting in March.
Across Wales, local government funding is set to increase by 4.3% next year to a total of £6.1 billion.
Cardiff Council gets one of the biggest increases in funding - with a 5.3% rise amounting to an extra £33.9 million.
Local Government Secretary, Jayne Bryant, said: "This settlement reflects our ongoing commitment to protecting core frontline public services as far as possible, supporting the hardest hit households and prioritising jobs."
"We have been through a long period of austerity, with huge increases in demand for major services, a pandemic, and an extra-ordinary inflationary period."
"We have been listening to local government to continue to understand the challenges they’re facing. The additional funding from the Autumn Budget, means we have been able to increase our overall settlement for 2025-26 by more than £1 billion."
"We know that even with this increase our councils will still have to make difficult local choices. However, no local authority will see an increase of less than 2.8% next year and we will continue to work with local authorities on areas where we might be able to provide additional funding by the time of the final budget."
She added: “It will take time for public finances to recover after 14 long years of austerity, but we will continue to work with our local authority colleagues to ensure the best use of resources and deliver for the people of Wales.”
But the Welsh Conservatives argued that Labour's use of the funding formula had prioritised what shadow local government minister Peter Fox called "cash reserve rich heartlands" while "ignoring the needs of councils like Monmouthshire, Powys and Flintshire that have been left at the bottom of the pile."
He added: "And we still lack clarity...as to whether the increase costs incurred through the Chancellor's National Insurance rise will hit council budgets directly, impacting on already sky-high council taxes."
Plaid Cymru accused Labour of "pushing local authorities into an existential crisis" with the public set to "bare the brunt of it".
Their local government spokesperson, Peredur Owen Griffiths, said: "To fill the £559 million funding shortfall caused by Labour mismanagement, local authorities needed at least a 7% increase in revenue just to maintain the vital public services they provide, let alone start on the improvement required in these vital services."
"Today’s announcement simply does not go far enough to ease the budgetary constraints faced by Welsh councils, and will force them into tough decisions on the future of public services that have already been cut, some even disappearing entirely."
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