Central government funding to youth offending teams (YOTs) has halved over the last eight years from £145m in 2010/11 to £72m in 2017/18.
The LGA said it is concerned that councils have still not received their youth justice grant allocation for 2018/19, despite having to set their budgets within the next two weeks, making it difficult for them to plan how they will support young people and prevent reoffending.
The LGA said that cuts to the government's youth justice grant since 2010 has resulted in councils having to make up more of the funding for YOTs from their own budgets.
However, faced with significant rises in demand for urgent child protection work and an estimated £2bn funding gap for children's services by 2020, councils are being forced to divert the limited funding they have left away from preventative work, including YOTs and youth work, into services to protect children who are at immediate risk of harm.
The LGA said latest knife crime figures show the continuing need for early intervention work among young people at risk of crime.
While over the last decade there has been an 85 per cent drop in the number of first-time young offenders, latest Ministry of Justice (MoJ) figures show an 11 per cent rise in knife crime among young people since March 2012. This compares with a 10 per cent reduction in knife offences among adults over the same period.
"Youth offending teams have an outstanding track record in working with children and young people to stop them coming into the youth justice system, but they've been victims of their own success," said Richard Watts, chair of the LGA's children and young people board.
"As the numbers of young offenders has fallen, so has the grant from central government to continue the preventative work that caused the fall in the first place."
"Increases in knife crime amongst young people highlights the challenge still facing youth offending teams, and we're worried that cutting back on funding risks undermining the progress that's been made over the last decade."
He added: "With council children's services budgets increasingly focused on those children in the most urgent need of protection, YOTs are struggling to access the funding necessary to run vital, and successful, prevention and intervention schemes.
"With council budgets being finalised in the coming weeks, youth offending teams need to know that they can rely on the same level of grant funding as last year, at the very least, to continue their work to keep young people out of the youth justice system."
Lesley Tregear, chair of the Association of Youth Offending Team Managers, said: "As multi-agency partnerships, YOTs are reliant on all partners providing sufficient funding in a timely manner.
"In many areas this grant is a significant contributor to YOT funding and as such delays in notification creates a risk to effective planning for service delivery.
"YOTs have been highly successful in providing unprecedented achievements in preventing and reducing re-offending, and in avoidance of custodial sentences for children.
"However, in the past few years YOTs have experienced significant reductions in funding from the YJB and some partners to the YOT. The AYM is concerned that further ongoing reductions will eventually result in a YOTs inability to continue to achieve further reductions in youth crime."
A Standing Committee for Youth Justice spokeswoman said: "We are concerned about the late announcement of this significant element of funding for YOTs as it will make planning very difficult, and places jobs in jeopardy in an unnecessary manner.
"It is poor practice to put YOTs in such a position. For a long time now the MoJ has been insensitive about the need to settle budgets early enough and this causes uncertainty and can lead to waste."
An MoJ spokesman said: "The number of children entering the criminal justice system for the first time continues to fall year-on-year, with local authorities playing a key role in helping them turn their backs on crime.
"Last year, we gave the Youth Justice Board £72m to allow local authorities to provide the best possible services for children, and we will shortly confirm funding for the next financial year."
