Councillors in Edinburgh have agreed the city's budget for the coming year.
Officials said they were facing their "greatest financial challenge" in living memory as they slash spending by more than £100million in the coming three years.
The local authority faced efficiency savings targets which have to be met each year, however, officials say the current economic climate has left them facing a £90million black hole which must be filled.
The city council put forward plans which see an overall reduction in public spending of £41.6million in the next 12 months, £27million of which will contribute towards filling the £90million void.
The local authority will make further additional cuts of around £60 million in the following two years.
Councillor Phil Wheeler, convener for Finance and Resources, said: “We have managed to freeze council tax and protect essential frontline services. We have also added £2million to our reserve funds to cope with unexpected circumstances and unforeseen situations such as flooding, all while the council faces the greatest financial challenges it has experienced in living memory.
“It is essential that we build on our reserves to meet future financial risks if the council is to maintain a sustainable budget. Despite these pressures we will continue to invest in Edinburgh’s long term prosperity."
The local authority insists it is doing everything possible to protect education and care services, with the overall education budget increasing by £5.2million in 2010.
However, that cash will immediately be swallowed by increases in teacher pay awards, new rules on teacher leave entitlement, increased property rates and class sizes, which are expected to cost £7.2million more.
That leaves the council with a shortfall, resulting in the one percent school budget cuts which brought around 400 parents and pupils to protest outside the City Chambers on Tuesday.
Speaking ahead of the anti-cuts rally, City Education Leader, Councillor Marilyne MacLaren said: "Following on from the full protection of school budgets last year, this administration has continued a strong commitment to education and children’s services by prioritising school budgets.
“Unfortunately some services will still be affected but by reducing savings in schools budgets to just one percent we are safeguarding £3million that can be targeted where it is most needed."
However, the council's Labour group branded the administration's reassurances over education spending as "a work of fiction".
Labour leader Andrew Burns said: "The administration is attempting to deceive parents, yet the simple fact is that not one penny of additional schools funding will go to head teachers."
Councillors also faced a second, pre-budget rally on Thursday morning, when trade union members gathered to protest against service cuts.
Unison said the council's plans see a reduction in service standards, with some being outsourced.
Council leader Jenny Dawe said: “The council must continue to improve the efficiency and productivity across all services and where appropriate look at other ways of delivering them.
"Sharing services with other local authorities and public bodies is another option we are looking at which could help to modernise the council.”
However, Labour finance spokesman Ian Murray blasted reductions as "a clear attack on public services in Edinburgh at a time when the council’s revenue budget is actually rising."
Among the proposals supported are a pledge to retain Lothian Buses under public ownership and a commitment to spending £37million to refurbish the Commonwealth Pool.
Officials also asked for any reduction in Edinburgh festival funding to be capped at 1.5%.
Authorities across Scotland are expected to announce a freeze on council tax in line with recent years.
