Pensioners would prefer to pay their bus fares rather than be responsible for cuts to services, it is claimed.
Many services could be withdrawn to make up the £7.3m shortfall
The North East Pensioners' Association said many people did not want to travel free on buses from April at the expense of other travellers.
Transport operator, Nexus, needs to make up a £5.6m shortfall to fulfil a pledge to give pensioners free travel.
But on Tuesday the transport operator learned it was only going to receive £1.7m, and said cutbacks would follow.
John Berry, spokesman for the North East Pensioners' Association, said: "We make the point very strongly that we do not want to acquire free travel at the expense of other people. "
Nexus said student services, travel discounts for children, special care buses and services running through housing estates were all under threat because of the budget shortfall.
One of the services facing the axe is a route through Whitley Bay in North Tyneside, used mainly by pensioners.
Nick Brown, MP for Newcastle East and Wallsend, said the government's position could not be defended.
He said: "We are now seeking meetings right at the top of government to press the case further. The position of Nexus is completely defensible.
"The actions the deputy prime minister's office have taken, or rather haven't taken can't be defended."
A spokesman for the Office of the deputy Prime Minister (ODPM) said it would continue to "hold talks" with Tyne and Wear transport operators.