Mansfield Shire chief executive David Roff said as a sector, statewide, it is an issue and there are attempts to try and have the decision reversed.

"The dollar amount offered by the government dropped and because of the formula with the four libraries in the HCLC, the funding cuts will impact on services," he said.

"But there are discussions going on at a high level."

HCLC chief executive officer, Elaine Richmond, said the whole situation was very fluid with Municipal Association of Victoria (MAV) and other councils still looking at the situation.

"If the government does not reverse its decision we will have to look at service delivery, but this is a decision for the future as it will have to go to the board first," Ms Richmond said.

"We were expecting at least an indexation rise, but in fact the figure being offered is lower than the subsidy for last year's recurrent funding.

"It means we will not even be treading water, we will be going backwards," she said.

"We will have to look at operations to see where we can make savings.

"It is now up to the government to reconsider its position and come back with another offer.

"The pressure is being put on the government by councils with most not signing the current offer."

Councils were taken by surprise as the government held back its announcement of lowered funding until after the majority had adopted their 2011-12 annual budgets.

According to MAV president, Cr Bill McArthur, councils were shocked to discover that, without warning or explanation, the government had cut its recurrent funding contribution for public library operating costs.