Using School Lunch Subsidies for Low-Income Students as Intended

The Agriculture Department posted a regulation on its website today to make sure that federal subsidies to help pay for school meals for low-income children don’t instead subsidize junk food or meals for better-off children.  It also will generate a much-needed infusion of non-federal revenue to build on new federal investments to improve the quality of school meals.

As we have explained, many school districts don’t charge nearly enough to cover the cost of “paid lunches” — those for students whose family incomes are too high to qualify for free or reduced-price lunches.  Moreover, contrary to a common misperception, “competitive” foods sold outside the school meals program — such as foods sold in vending machines or à la carte in the lunch line — are revenue losers for schools, on average.

As a result, some school districts divert part of the federal subsidies that are supposed to help pay for meals for low-income children to subsidize meals for better-off children and competitive foods.  When Congress renewed the school meals programs last year, it included two provisions to fix that; today’s regulation implements those provisions.

The first provision requires school districts that bring in less revenue for each paid meal than the federal subsidy they receive for each free meal to close the gap between the two, by raising more non-federal revenue from each paid meal.  (They could, for example, contribute state or local funds or raise paid lunch prices.).  But they can do so gradually — so gradually, in fact, that some districts will take more than 20 years to eliminate the gap.  Still, this is an important step in the right direction.

The second provision requires school districts that offer competitive foods to fund them on their own, without diverting any federal subsidies for low-income students.  That will take full effect at the start of the next school year on July 1.

The possibility of school districts raising paid lunch prices makes people very nervous — understandably.  But in those districts that choose to raise the price of paid lunches just enough to comply, the increase next year will amount to about $1 per child per month.  It’s hard to imagine even struggling families dropping out of the school meals program in droves in response to such a small increase.

Plus, the price increase for competitive foods will lead some children to switch to the school meals program.  In fact, the Agriculture Department estimates that by the second year of implementation, nearly 900,000 children will start eating school meals as a result of higher competitive food prices.  That’s seven times as many children as would eventually stop eating school meals as a result of the higher school lunch prices.

These changes will put school food programs on much sounder financial footing.  Not only will schools receive higher revenues from competitive foods due to the price increases, but the increased participation in school meals will bring in more federal subsidies.  (Schools receive a small subsidy for each paid meal they serve, as well as a much larger subsidy for each free or reduced-price meal.)

Together, the two provisions will increase revenues for school food programs by $7.5 billion over the next five years, according to the Agriculture Department.  That’s on top of the estimated $3.2 billion in added federal subsidies over the next ten years in the school meals renewal legislation enacted last year —new investments to improve the quality of meals for all students.

The goal of the school meals programs is to provide affordable, nutritious meals that children want to eat.  The new provisions on paid meals and competitive foods will help them achieve that goal.