The Chase Line which runs through Cannock, Hednesford and Rugeley is one of the fastest growing in the country.
Work on a £30million electrification of the service was launched this year
As part of the deal, the Department for Transport had been due to take over the financial running of the line from Centro, Staffordshire County Council and Cannock Chase Council in March next year.
However the authorities have now been told there is 'no prospect' of doing so before spring 2016.
Cannock leader George Adamson has described the news as 'very disappointing.' He said that Cannock is believed to be the only district council in the country to contribute to its rail services
He said: "It's a blow. This is money that could usefully have been spent elsewhere. But we've got to keep the service running - It's one of the most well used in the country. We will be meeting next week to agree the funding."
Almost 700,000 journeys a year are made on the Chase Line which runs from Rugeley through Walsall to Birmingham, according to figures published by the council.
In 2012 alone an additional 91,000 passengers used the rail service, which saw increases in use of between 13 per cent and 29 per cent at Cannock, Hednesford and Rugeley Town, leading to a leap in passenger revenue of more than 70 per cent.
Currently Centro pay out £146,000, Staffordshire county Council £39,000 and Cannock Chase Council £10,000 towards the running of the rail service - funding that the Department for Transport was due to take on permanently next year.
Councillor Adamson added: "We see them as vital to our growth and the prospect of generating jobs and services for our residents. It's taxpayers money well spent."
South Staffordshire Council do not contribute any funding to the line which runs through its district.
The £30m electrification scheme will speed up trains on the Chase Line from 45-50mph to 70mph as diesel trains are replaced by electric ones across the 15-mile service.
Twenty-four railway bridges will either be rebuilt or modified as part of the work. Motorists are bracing themselves for major disruptions to road journeys as the bridge work is carries out. The whole project is due to be completed in 2017.