The Scottish Government has warned that allocating an extra £140million to help settle a council pay dispute, which could have led to uncollected rubbish piling up in the streets, will mean sacrificing other spending plans.
Deputy First Minister John Swinney announced the new funding after talks with local authorities.
He said the Government was keen to make sure council employees, who had initially been offered a 2% rise, get a fair salary.
But, with the budget fully allocated, he said very difficult decisions would have to be made to find the money. However, Mr Swinney gave no indication on which specific spending plans could be hit.
One union has said that, until the extra funding translates into a formal "significantly-improved" offer, plans for strikes are still on.
Staff at schools, nurseries and waste and recycling centres voted to strike after rejecting the 2% pay offer in March.
The deputy first minister told the BBC there were "massive pressures" due to the cost-of-living crisis but he hoped progress could be made "at the earliest opportunity".
Budget fully allocated
"The Scottish Government's budget is fully allocated, and we will have to take very difficult decisions to provide £140million of new resources to local government to assist them in making an improved offer to council employees," he added.
"That will involve us making financial sacrifices.
"It involves us changing programmes and changing timetables for programmes, but we recognise that we've got to work with local authorities to put forward an improved settlement offer for council staff."
Leaders of the local authority body Cosla met last week to discuss the prospect of industrial action by members of the Unite, Unison and GMB unions.
The council leaders decided they needed more information and said they would reconvene this week.
Mr Swinney later said that the Scottish Government would contribute £140million of recurring funding to help Cosla make a revised pay offer.
GMB Scotland organiser Keir Greenaway accused Government and council leaders of "squabbling" over where to find the money to settle the dispute.
Cost-of-living crisis
He said the current cost-of-living crisis meant workers were already struggling to pay bills and feed their families.
"Unless a significantly-improved offer is found, then tens of thousands of local government workers will fall into working poverty and that will turn the cost-of-living crisis for them into a catastrophe," Mr Greenaway added.
"Whatever money has been found by the Scottish Government, that hasn't found its way into a formal offer to our members yet. And, until that happens, we'll still be looking at industrial action."