Public sector think-tank LGinsight conducted a national opinion survey of 1,003 adults at the start of October.
It found that 45 per cent of residents did not expect the amount of money councils receive from government to be cut, with 13 per cent of residents believing the amount of money councils receive from government would actually increase during the next 12 months.
Neil Wholey, LGinsight chair and head of research at Westminster City Council, said public sector communicators would have to work harder.
'Not everyone follows the national news and not everyone seems to be getting the message that, for the public sector, there are undoubtedly going to be tough times ahead,' he said. 'Keeping residents informed about proposed service and budget changes helps to ensure they understand them, as well as the role of the local authority.'
Despite the misconceptions, 60 per cent of adults said they thought they were kept very or fairly well informed about council services.
The survey results come as councils across the country look for ways to balance their books in response to Wednesday's Comprehensive Spending Review delivered by Chancellor George Osborne.
The least prepared residents are those in the North East of the country, with as many as 30 per cent believing government funding will actually increase during the next 12 months and 65 per cent of people saying the value for money they receive from council services will stay the same or increase.