Edina schools could face tough budget choices this year, as schools and districts across the state contend with dwindling federal aid and rising costs.

The Edina district could run a $4 million deficit in the 2023-24 school year, school business services director Mert Woodard told the school board this week — a projection that includes very conservative estimates about how much state aid Edina could receive, and assuming the district makes no cuts.

"We as a district are coming up with cost-containment strategies," Superintendent Stacie Stanley said. School administrators would seek community input before presenting proposals to the board in the months to come, she said during a school board meeting Tuesday.

Though the actual deficit could be lower than projected, Woodard said he wanted the board and the community to prepare for a more difficult budget year as costs rise faster than revenue.

More than half of the $8 million cost increase Woodard projected is for a 4% raise for unionized staff, including teachers. Much of the rest is related to rising costs for heat, electricity and other utilities.

COVID-19 aid that Edina has been using since 2021 to pay for ongoing expenses, including paraprofessionals who work with students with individualized education plans, is also dwindling. Any district that, like Edina, has been using the one-time funding to pay operating costs will face funding dilemmas, Woodard said.

But it could be worse, he said. Edina voters in 2017 approved a referendum that ties local school funding to inflation, and Woodard said this year's inflation will trigger about $2.2 million in property tax revenue. Increasing property values raise the new revenue to $4 million, bringing the projected deficit down from $8 million to $4 million.

Woodard and school board members said they hoped the state would increase funding for school districts.

"The state of Minnesota provides funding for an adequate education," Woodard said. "In this district, we provide an excellent education."

Correction: A previous version of this story incorrectly stated the amount a 2017 referendum would generate in property tax income. Edina officials project the referendum will generate an additional $2.2 million, with more revenue expected from rising property values.