Auckland's Pasifika Festival is being scaled down because sponsorship is $335,000 below budget.
The festival - the city's largest - attracts about 250,000 people to Western Springs over the course of the two-day event.
As a result of the shortfall, Auckland City Council is reducing the 14 March event to one day, and saving $130,000 by cancelling the opening concert and cutting onsite staff, marketing and headline artists.
The remaining $225,000 shortfall will be made up by using money earmarked for other council activities.
Councillor David Hay voted against bailing out the festival because the cost to the ratepayer will almost double, for a reduced event.
He says such expenditure is not right in today's environment.
Auckland City Councillor Glenda Fryer says the Government told state-owned enterprises that were financially supporting the festival to withdraw their money.
She says the Government is two-faced in asserting it supports diversity but being unwilling to fund it.