April-May-June 2016

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Equity in School Lunch Pricing
By Linda Schloer, Child Nutrition and Food Distribution Director
What is the “Equity in School Lunch Pricing” Provision?
Effective July 1, 2011, section 205 of the Healthy, Hunger-Free Kids Act of 2010 requires school food authorities (SFAs) participating in the National School Lunch Program to provide the same level of support for lunches served to students who are not eligible for free or reduced price lunches (i.e., paid lunches) as they are for lunches served to students eligible for free lunches. The Act directs SFAs to:
  • Compare the average price charged for lunches served to students not eligible for free or reduced price lunches (i.e., students receiving “paid lunches”) to the difference between the higher federal reimbursement provided for free lunches and the lower federal reimbursement provided for paid lunches.
  • If the average paid lunch price is less than the difference, an SFA must either gradually adjust average prices or provide non-federal funding to cover the difference.
Why is this provision important?
Historically, there have been three main sources of funds provided to nonprofit school food service accounts: federal reimbursements, paid meal revenues, and state and local funding. The federal reimbursement for paid meals was designed to be minimal in relation to these other sources and has always been substantially less than the reimbursement for free and reduced price meals.
  • Research indicates that average prices charged for paid lunches in some SFAs are less than the cost of producing those lunches.
  • Pricing paid lunches below the cost of production effectively increases federal subsidies for higher income children because federal funds intended for free and reduced price lunches are being used to help fill in the gap between what a paid lunch costs and what the school receives for it. Children across all income levels are negatively affected by limiting the funds available to provide nutritious meals.
  • This provision will help ensure that schools have funding available to support serving nutritious meals to all students.
Which SFAs are affected by this provision?

Not all SFAs will be required to adjust prices or find alternative sources of funding for paid lunches. Applying this provision using current federal reimbursement rates, SFAs in the continental U.S. now charging, on average, $2.78 or more for a paid lunch would not be required to adjust prices in school year 2016-17.

In general, when the adjusted average price is more than the current price, an SFA would have to either increase its average paid lunch price to the adjusted average price or provide additional non-federal support for its paid lunches. The law caps the required increase in the average paid lunch price at ten cents in any year. Therefore, an SFA with a significant gap between its price and the required level will have several years to make adjustments to its prices and/or provide other funding to the SFA account in order to meet this requirement.
Do SFAs have control over establishing paid lunch prices?
SFAs maintain significant local control in establishing the prices for paid lunches. SFAs may maintain low paid lunch prices if they ensure that sufficient funding from non-federal sources is added to the school food service account to cover the required revenue. SFAs also may vary paid lunch prices by school (for example, charging lower prices in schools located in lower-income areas or charging different prices in elementary and secondary schools), as long as the average revenue requirement is met across the SFA.
For additional information regarding Equity in School Lunch Pricing contact Deb Egeland at degeland@nd.gov.