Councils across Scotland are almost £16billion in the red.
Shock new figures reveal that local authorities’ borrowing has increased by more than 10% since 2011.
The annual audit of local government finance also saw councils report an overall revenue surplus of £69.4million for 2014-15, compared with an overall deficit of £54.8million in 2013-14.
Spend on services also increased by 1% to £10.5billion in 2014-15, with the highest spend going to education.
Total debt for local authorities was £14.2billion in 2011, but that has now risen to £15.9billion.
Despite the rise in borrowing, debt per head has remained fairly consistent with previous years at £2,377.
Local government finance has been under increased scrutiny after the SNP passed a budget with a reduced settlement for councils.
But Deputy First Minister John Swinney said the figures published yesterday suggested councils had been treated “very fairly by the Scottish Government”.
He added: “My priority has always been to deliver a financial settlement that councils can accept in order that we can pursue shared priorities which will improve outcomes for local people through health and social care integration and improving educational attainment.”
Scottish Liberal Democrat leader Willie Rennie said the figures showed it would be increasingly difficult to “ensure that our kids get the quality education they deserve”.
He added: “What these figures show is that education spending is set to be hammered by the scale of the £500million in cuts that John Swinney has imposed on councils for the coming year.
“Half of what councils do is education and John Swinney bullied local authorities into accepting a financial settlement that will mean big cuts in our schools.”