The Daily Record reported the letter has been signed by all 32 council leaders which includes several SNP councillors such as Edinburgh City Council’s Adam McVey, Glasgow’s Susan Aitken, and Dundee’s John Alexander.
The letter argues the budget settlement for local government includes a £371m “real terms cut” is “unacceptable”.
Leaders are now calling for an “urgent meeting” with the First Minister and the leadership of COSLA in order to thrash out the problems facing local government.
The intervention comes as the Scottish Government decided to lift the council tax freeze, raising fears local leaders will be forced to raise council tax significantly to keep up with rising costs, pushing the cost of any budget shortfall onto taxpayers.
The health service received the largest share of funding in the budget, but councils have been complaining for years about declining budgets alongside increased demands on their services.
SNP ministers have in the past placed the blame on Westminster austerity policies which they say have constrained their budget since 2010.
It also said the £371m figure was “misleading”.
The letter from council leaders reads: "As Council Leaders from the 32 Local Authorities in Scotland, we are writing on behalf of the communities we serve, to say that we are deeply concerned at how the Scottish Government has treated Local Government in this year’s Scottish Budget.
"At a special meeting of Leaders on 21 December, we expressed our extreme disappointment at the Local Government financial settlement for 22/23 that has now been circulated to Councils.
"Our view is that this settlement, which is a £371m real terms cut in core funding, is unacceptable. Every penny of the cash increase presented on the 9 December (£791m) is for Scottish Government policy priorities and in real terms, erodes our core funding – funding that is essential for the services that underpin our communities and support our shared ambitions including recovery, economic transformation and eradicating child poverty.
"Put simply, it does not allow us to enable people to ‘live well locally’. We are unanimous in our view that we have been managing challenging budgets for over a decade now but that there is now no room to make further savings, without a detriment to our communities.
"Additionally, the settlement does not include any funding for pay, inflation or increased demand for services. The impact of this Settlement will be stark for our services and our staff. It will mean that Local Government must reconsider commitments at a local and national level.
"Yet again, this settlement demonstrates that Scottish Government is not giving Local Government the respect it deserves and is showing complete disregard for Local Government’s role as a key partner in achieving better outcomes for the people of Scotland.
"COSLA Leaders believe that the relationship between Local and Scottish Government has been called into question by this Scottish Budget which, for the benefit of our communities, we must work to rectify immediately.
"We would ask that an urgent meeting is set up with you, First Minister, and the COSLA Leadership Team including Political Group Leaders."
Responding to the letter, a Scottish Government spokesperson said: “It is misleading to claim there has been a £371 million real terms cut to the 2022-23 core local government budget. This figure is extremely selective as it ignores almost £1.4 billion of other funding for joint priorities within the overall local government finance settlement of over £12.5 billion. The Scottish Budget provides revenue funding amounting to over £11.8 billion - a cash increase of £855.4 million and a real terms increase of £543.6 million.
“Despite the continued economic uncertainty facing us all as a result of the pandemic, we are treating councils fairly and providing a real terms increase of over 5% to local authority budgets for the coming year. Councils themselves asked for financial flexibilities this year such as the ability to take their own local decisions on raising council tax, which we were pleased to provide.”