The authority is facing a massive £97m gap in its finances over the next three years following a series of Scottish and UK government decisions, together with new costs faced by the city council.
Directors of each council department are now set to draw up a series of cuts proposals, with councillors due to decide on the cuts they will make as part of the 2012-13 budget process, due to be completed in February.
The £22.5m of cuts now required for next year come on top of £18m of savings already approved for 2012-13.
Proposals by council officials that were rejected by councillors earlier this year included plans to axe more than a third of the city’s lollipop men and women and plans to ditch social work teams at hospitals.
These proposals and others could now be brought back to the table by officials.
City leader Jenny Dawe said: “It will be very difficult to find these savings and we will go through the challenging process where directors will say where they think we can make savings.
“Some we will reject because, politically, they are not the right thing to do, but others we will have to consider.
“The directors will look either at new things or possibly also things we have looked at in previous years.”
However, she stuck by a previous commitment to not contemplate any further school closures until the end of the current council administration term next year.
Cuts already identified for 2012-13 but still to be introduced include the closure of half of the city’s public toilets, a move to fortnightly refuse collections and a further reduction in school management costs.
The new pressures on the council for next year include changes to national insurance employer contributions, which will cost it £1m, and the inability to implement £4.1m of savings from making teachers spend up to one hour a day extra in the classroom because of the Scottish Government’s McCormac review of teacher pay and conditions.
The Scottish Government has also confirmed it will not provide direct additional compensation for authorities that agree to freeze council tax, resulting in around £7m of lost revenue.
Cllr Dawe admitted it will be difficult to avoid front-line cuts because of the number of back-office savings already found.
She said: “What we will look at is realistic ways of delivering that £22m we need to find, which is quite challenging.
“There is no doubt it will be difficult. We have looked at everything that the council does, although there is a possibility that there may be savings either through joint ventures to deliver services or indeed transforming the way the council does things internally.”
The 2012-13 funding gap could be wiped out by a new Scottish Government ‘floor’, which would mean no council would receive less than 85 per cent of the average funding for Scottish councils per head of population.
Final confirmation of the impact on Edinburgh will not come until December but councillors will still be asked to approve £22m in order to help plug the three-year £97m gap.
Karen Kelly, head of financial services at the council, said: “My recommendation is that we prepare for closing that gap because even if the 85 per cent floor comes in and helps us, it still gives us a problem in years two and three.”