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We've been given a strong indication of the state of the finances of our public services.

The Local Government Minister Lesley Griffiths has written to council leaders saying: "I would suggest you consider how you would respond to reductions of up to 4.5%."

In the letter she also spoke about the "significant demands and pressures facing the NHS in Wales".

It's this which has caused most dismay among council leaders.

After Lesley Griffiths's letter was sent, the WLGA's finance spokesman Aaron Shotton wrote to his colleagues in local government saying there had been a "full and frank debate" on Monday night between her, the Finance Minister Jane Hutt and council leaders.

I think we know what that means.

Councils are losing out to the NHS when it comes to funding and they know it.

This realisation lay behind the comments of the leader of the WLGA Bob Wellington at a conference in Llandudno last week when he said: "In the next ten years we could be looking at a worst-case scenario where the NHS in Wales will move from 42% of the Welsh government budget to as much as 65%.

"If that statistic comes to pass local government in Wales will be squeezed of its functions, essentially an empty vessel reflecting on the glory days when it ran over 700 functions."

The financial focus on the NHS started last year when the Welsh government gave £570m more to health services in its budget.

Since then all the indications have been that it will continue. Now we have it in black and white.

The Welsh government believes councils have been largely protected from the worst of the age of austerity and now is time for local authorities to soak up some of the cuts.

This year councils have had to deal with cuts of on average 3.5% and council tax levels have gone up on average by 4.2%.

It is looking like things will be tighter next year.

Council leaders will be meeting this summer to work out a plan of action.

The debate is inevitably going to be intense.

Last year RCT council likened the cuts to "Armageddon" and was slapped down quickly by Lesley Griffiths.

The problem councils have is the intense pressure the Welsh government is coming under to boost health budgets.

The latest warning from the audit office showing that three health boards have gone over-budget is the latest of many indications.

Cardiff and Vale UHB, Hywel Dda UHB and Powys Teaching Board had each overspent by almost £20m.

As I've written about in an earlier blog this week, it has been interesting to see how re-organisation fits into this financial picture.

On that, the Institute of Directors weighed into the debate telling MPs that the "ridiculous" number of local authorities in Wales was damaging economic development.

The chair even suggested that a cut in councillors could be balanced by an increase in the number of AMs.

With comments and financial settlements like these, you can see why siege mentalities are building up in town halls across Wales.