The number of priests could fall in Devon because some parishes don't pay their way, according to a confidential letter seen by the Western Morning News.
According to the letter from the Bishop of Exeter, the Right Reverend Michael Langrish, the diocese is £620,000 in the red with a further £400,000 worth of cuts to be made.
Plans are afoot to draw-up a new budget and combat the deficit but job losses look likely.
The letter was sent to suffragan bishops, priests, deacons, readers and church wardens.
Bishop Michael said the diocese faces "significant financial challenges" and every year spends around £13 million ministering parishioners.
Of that just under £9 million comes from the Common Fund that pays 80% of salaries and comes largely from the collection plate. Funds also come from Church of England Commission and investments.
Parishes repeatedly not putting their bit into the fund are being blamed for the financial problem.
Previously the deficit was swallowed up in the budget by asking other parishes to cough up a bit extra.
Last year however, the Diocesan Synod said it was fairer to get all who use the fund to pay their way.
In the letter, Bishop Michael said: "As we are not willing to ask parishes who are already paying in full (many in difficult circumstances themselves) to contribute more, we are now facing an annual deficit of around £620,000.
"This means that, as we look ahead together to 2013, we have to take some difficult decisions about what work we can and cannot fund anymore."
The bishop goes on to say the number of stipendiary (salaried) clergy will be reduced.
He said: "We will have to accelerate the decrease in the number of stipendiary parish priests which was originally projected to fall by about two each year and reach 190 by the year 2020.
"We will do this in the first instance by prolonging vacancies. We will also need to reduce the number of new stipendiary clergy we ordain each year by one.
"We also need to make some £400,000 of savings from a range of centrally resourced services which are provided for the benefit of parishes and those involved in parochial ministry.
"This will entail reductions in working hours, voluntary redundancies and possibly even compulsory redundancies. These are cuts which will result in a wholesale restructuring at every level of diocesan life. Some of what we currently take for granted will disappear."
The bishop's Diocesan Council is due to meet on July 18 to discuss the budget.
A spokesman for the bishop said: "The plan was for discussions to take place before a framework was put on the diocesan website asking for comment."