Cornwall Council has warned of children missing out on school places after ministers slashed building cash that would have relieved pressure on over-crowded classrooms.
Cornwall's frustration has been compounded by neighbouring Devon getting a financial boost to tackle their bulging classrooms.
This is despite both areas boasting a similar mix of rural schools with falling rolls but also over-subscribed schools in towns.
Cornwall Council said it was "disappointed" to see its "basic need" grant fall by £300,000 to £1.3 million in 2013/14.
The authority said Education Secretary Michael Gove had "failed" to understand the social and economic balance of the area.
By contrast, Devon County Council will see get a £5.2 million "basic need" grant for extra school places – £400,000 more than last year.
Cornwall Council complains that, on paper, it appears the area has sufficient school places. It argues the figures are deceiving because while rural schools have surplus places, those struggling to cope are in larger towns many miles away.
The cash snub was despite providing Whitehall officials "extremely comprehensive data" on schools projecting a shortfall of pupil places.
The authority's policy is not to shut any schools, however small, given the vital community role they play in rural villages.
A Cornwall Council spokesman said: "We will need to explore alternative means of funding the provision of additional pupil places if we are to fulfil our commitment to provide a local school place for every child who requires one.
"This decision demonstrates that the Government has failed to take on board the particular demographic and socio-economic pressures relating to Cornwall's schools."
A Devon County Council spokesman said the cash was in line with expectations, but there "continues to be significant pressure" on places in Exeter, Exmouth, Braunton and Bideford.
Plymouth City Council's grant for extra places is down by £600,000 to £3.3 million and Torbay Council will receive £1 million to cope with over-crowded classrooms – £500,000 less than last year.
The classroom cash was announced at the same time as money for repair and maintenance of schools. In total, the four education authorities in Devon and Cornwall will get £3.5 million less, or a 9% cut, compared to last year.
But the £37.5 million in total does not include cash going to the growing number of opted out academies for repairing leaking roofs and crumbling buildings. This is not the case for "basic need" cash.
But Mr Gove said: "Some local authorities will see their funding go up, while others will see funding levels go down."