The loss of two correctional centres at Ivanhoe and Brewarrina will have a severe effect on the towns' economies and schools, the Isolated Children's and Parents' Association (ICPA) NSW says.
ICPA-NSW said it was concerned that the negative impact on education in both Brewarrina and Ivanhoe has not been considered by Corrections in the "retirement" of two correctional facilities in Far West NSW.
The Government has promised to look at repurposing the facilities.
ICPA State President, Claire Butler, said that the decision will have a "dire effect on enrolment numbers at nearby schools - for example Ivanhoe has a school of 27 students and with the removal of the staff from the correctional facility, that will reduce the enrolments by five".
"Education and health go hand in hand, so it is therefore very concerning that the dramatic reduction of population will negatively impact access to both education and health services in these towns and outlying areas.
"Approximately 20-30 staff are impacted in each town" Mrs Butler said.
"Due to the drought, the only economic driver currently, for many towns in NSW, is the employment offered by Government agencies.
"I am astounded that this decision has been made, without community consultation and without any thought to the ripple effect this will have on the community left behind - their access to education, health and employment.
"Unfortunately, this sends a very unsettling message to families in rural and remote areas. These facilities and the employment and support they offer small towns plays a vital role in terms of strengthening communities, especially during these unprecedented hard times.
"ICPA-NSW calls on the NSW Government to reverse this decision to ensure the viability of these areas."
A spokesperson for Corrective Services said: "Brewarrina and Ivanhoe are two of our smallest correctional centres, currently housing a combined 45 inmates. The vast majority of inmates do not originate from the areas close to those centres.
"The NSW Government will work with the local community to consider options for repurposing the facility. Initially Corrective Services NSW will consult with Brewarrina Shire and Central Darling Shire councils to determine the best way for community engagement to occur.
"CSNSW has created hundreds of jobs in regional NSW as part of the Prison Bed Capacity Program, with the opening of the Hunter and Macquarie correctional centres in Cessnock and Wellington, and expansions at South Coast and Shortland correctional centres in Nowra and Cessnock."
Minister for Counter Terrorism and Corrections Anthony Roberts said the NSW Government would retire operations at Berrima, and in the Illawarra in early 2020 and Ivanhoe and Brewarrina in mid-2020.
"We will support staff through this process and hope to retain as many of our experienced officers as possible."