The chief constable of Gloucestershire Police says a government financial settlement could leave the force with a £2m budget shortfall.
The constabulary has been given a 3.2% grant increase in 2006/2007 and 3.7% in 2007/2008.
But Dr Tim Brain says they needed 3% alone to cover rising pay costs agreed in the summer and a further 3% to cover government police reforms.
He said the budget "appears to create some real difficulties".
He added: "At the moment we are looking at a shortfall of around £2m at least.
"In addition the constabulary is also concerned that elements of funding for security and counterterrorist activities have still to be finalised."
Brigadier Michael Browne, the chairman of Gloucestershire Police Authority, said it could take time to work out the effects of the new budget.
"The police authority is going to be faced with some difficult choices and cuts in service levels may be unavoidable.
"The government has set a national efficiency target of 3% in the current financial year, and we are well on track to achieve it.
"Finding further savings is becoming difficult."
He added last year the police used reserve cash to keep down an increase on council tax.