The Stormont Executive will have to make cuts of about £1bn over the next five years, Environment Minister Edwin Poots has predicted.
In a letter to Northern Ireland's 26 councils, Mr Poots said he was asking them to fund the £118m cost of amalgamating them into 11 larger areas.
The minister said the Executive was facing a difficult financial future.
He asked them to respond by Friday ahead of an Executive meeting six days later to discuss the plans.
John Mathews of the Northern Ireland Local Government Association said he initially thought Mr Poots' request for councils to foot the bill was a joke.
"The minister has had about nine months and has known the position of local government and what conditions we are prepared to go along with for the reorganisation," he said.
"We have always been very clear that if this reorganisation is to happen, it has to be on a cost-neutral basis for the ratepayer."
The cost of merging the councils is believed to be around £118m, with another £20m for the expense of converging rates bills.
The Review of Public Administration, which also includes reforms to the health and education sectors, was meant to save the Executive more than £400m over the next 25 years.