UNITED STATES DEPARTMENT OF AGRICULTURE
Food, Nutrition and Consumer Services
Testimony of Kate Houston, Deputy Under Secretary
Food, Nutrition and Consumer Services
Before the House Education and Labor Committee
July 9, 2008
Good morning, Mr. Chairman and Members of the Committee. I am
Kate Houston, Deputy Under Secretary for Food, Nutrition and Consumer Services (FNCS)
at the U.S. Department of Agriculture (USDA). Thank you for the opportunity to
join you this morning to discuss the impact of rising food costs on Federal
Child Nutrition Programs.
USDA’s Food and Nutrition Services (FNS) is responsible for
administering 15 Federal nutrition assistance programs, which serve as the
Nation’s first line of defense against hunger and reach one in five Americans
every year. At times when people are facing economic challenges, our programs
are there to provide individuals and households with nutrition assistance. The
Child Nutrition Programs play a vital role in the Federal nutrition safety net.
This Administration continues to demonstrate strong commitment
to the nutrition assistance programs. Since 2001, funding for the nutrition
assistance programs increased more than 76 percent to $60.1 billion in fiscal
year 2008, and accounts for over half of USDA’s annual budget. In fiscal year
2009, the President’s budget requested $14.5 billion for the Child Nutrition
Programs.
The school meals programs are the cornerstone of our Child
Nutrition Programs. Each school day, the National School Lunch Program (NSLP)
and School Breakfast Program (SBP) serve more than 31 million school children of
all economic backgrounds with well-balanced, healthy meals designed to meet the
Dietary Guidelines for Americans. The school meals programs strengthen our
country by safeguarding the health and well-being of the Nation’s children.
The school meals programs are largely financed through Federal
cash reimbursements and commodity donations. Federal assistance for school
meals is an important source of revenue, but is not intended to be the only
source of such support to schools. Federal assistance constitutes just over
half of the revenue received by school food authorities. Student payments for
paid and reduced price meals, revenues from a la carte sales, and State and
local funding provide the balance of funds.
In the current environment, the challenge facing school meal
service is to ensure that all of these resources are being used to their fullest
potential to support the service of healthy school meals. We have, and will
continue to, assist schools to make the most effective use of the full range of
available resources. We work with State and school food service authorities to
promote the most effective use of Federal commodity dollars. Our commodity
support allows schools to take advantage of the Federal government’s large
volume purchasing power, often allowing the procurement of commodities at a
lower unit cost than if a school were purchasing product on its own. We also
provide training and technical assistance in procurement and effective
contracting practices to assist schools in obtaining quality products and
services at the lowest cost.
While much of today’s discussion may focus on the Federal
support for school meals—and I will now describe how the Federal reimbursement
process works – it is important to keep in mind that this is only one of the
resources available for supporting the school meal service.
Schools receive reimbursements on a per meal basis. School meal
reimbursements are established by law, and as required by law, the payments are
adjusted each year to reflect changes in food and labor costs based on the Food
Away From Home series of the Consumer Price Index for All Urban Consumers
(CPI-U). The CPI-U is a measure of the average change over time in the prices
of consumer items—goods and services that people buy for day to-day living,
based on data on the prices of thousands of items collected by the Bureau of
Labor Statistics. The CPI-U is the accepted index used by a number of
government programs to adjust the value of payments they provide to reflect the
real cost of goods and services. The Food Away From Home series reflects
changes in the cost of commercial meal service and is constructed from meal
pricing data, which include food and labor costs gathered from restaurants and
other food service establishments including workplace cafeterias and vending
machines. Annual adjustments in the Food Away From Home series of the CPI-U are
based on a twelve month cycle ending in May of the current year.
Public and nonprofit private schools and residential child care
institutions that participate in the NSLP and SBP receive cash reimbursements
from the USDA for each meal served at the free, reduced-price and paid levels.
The reimbursement rates or National Average Payments (NAPs) for lunches are
adjusted annually pursuant to section 4 and section 11 of the Richard B. Russell
National School Lunch Act. The rates for breakfasts are adjusted annually
pursuant to section 4 of the Child Nutrition Act of 1966. The National School
Lunch Act established a minimum reimbursement rate of 10.5 cents for all lunches
served to children as part of the NSLP in 1981. The rate is adjusted annually
using the CPI-U for Food Away From Home as prescribed by law, and is 23 cents
for school year 2007-2008. This base rate is the full amount for paid meals and
a portion of the reimbursement rate for the free and reduced price lunches.
Section 11 of the law provides additional funding (Special Assistance) for free
and reduced price meals. The rate for free lunches in School Year 2007-2008 is
$2.47. The NAP for each reduced price lunch served is 40 cents less than the
reimbursement rate for the free lunch. The statutes also require that the
annual adjustment of these rates, which is published in July, be rounded down to
the nearest cent.
The reimbursement rates vary depending on a school’s economic
circumstances and location. Schools with higher proportions of low-income
students, or greater than 60 percent of students determined to be eligible for
free or reduced price meals, receive higher reimbursement rates at lunch. At
breakfast, schools in which 40 percent or more of the students are low-income
receive a higher reimbursement rate for meals served. Schools in Alaska and
Hawaii receive a higher reimbursement rate because of higher cost of living.
The NAPs for the upcoming school year, July 1, 2008 to June 30,
2009, were published in the Federal Register on July 7, 2008. The reimbursement
rates for schools and residential child care institutions for SY 2009 (July 1,
2008 through June 30, 2009) will reflect a 4.272 percent increase in the CPI-U
Food Away from Home during the 12-month period May 2007 to May 2008. Most
schools with a relatively high proportion of low-income students will receive
$2.59 for each free lunch served and $1.68 for each free breakfast served in
school year 2009 compared to $2.49 for each free lunch and $1.61 for each free
breakfast served in school year 2008.
Assuming schools serve a comparable number of school meals in
the 2009 school year as were served in 2008, about $400 million in additional
reimbursements will be distributed. USDA’s budget projections for 2009 reflect
this increase in reimbursement as well as expected growth in program
participation.
In addition to cash reimbursements, schools participating in the
NSLP receive a USDA commodity entitlement for each lunch served. The value of
the commodity entitlement that will be provided in school year 2009 is 20.75
cents per meal, an 11 percent increase compared to 18.75 cents in school year
2008. On an average day, the commodity entitlement contributes approximately
15 to 20 percent of the product served on the school lunch line. The remaining
80 to 85 percent is purchased from commercial markets using the cash assistance
provided by USDA, funds provided by State and local governments, children’s
payments for reduced price and paid lunches, proceeds from vending machines,
catering activities and other funds earned by or provided to the school food
service.
Recent data from a USDA study released in April 2008 indicate
that over time combined Federal cash and commodity reimbursements have kept pace
with costs accrued by school food service for the production of school meals.
According to the study, on average, Federal reimbursements more than cover the
costs incurred by school food service to produce school lunches. The annual
adjustments in the cash and commodity reimbursement rates help schools deal with
rising costs over time; however, near-term cost increases can be challenging to
schools.
To address financial pressures resulting from higher costs,
individual school districts make a number of decisions that influence the cost
of operating the school meals programs. For example, schools may choose to
examine procurement practices and other opportunities to maximize use of
available resources, and to gain greater administrative efficiencies in their
food service operations.
Decisions by school districts also affect their ability to
balance costs with revenue. One facet schools may choose to examine is the
amount charged for a paid meal. According to the most recent available research
data from the USDA School Lunch and Breakfast Cost Study II, on average, the
combination of reimbursements and student charges for paid meals equals only 82
percent of the reimbursement that schools receive to support the service of a
free meal. This suggests that in some schools, Federal reimbursement for meals
served to low income students are effectively subsidizing meals served to higher
income students. Another area schools may choose to review is their charges for
a la carte items. Schools establish these prices and can make adjustments as
necessary to ensure that a la carte contributes appropriately to the cost of the
food service operations.
USDA supports schools with guidance and training to assist them
in responding to tight budgets and rising costs without compromising the
nutritional quality of school meals. FNS recently released “Meeting the
Challenge of Rising Food Costs,” a fact sheet providing practical suggestions
for strategies that may be helpful in controlling costs. This fact sheet also
contains links to other financial management resources which may be helpful to
schools.
Furthermore, schools will benefit from new funding provided in
the Farm Bill. The Farm Bill increased the amount of funds for purchases of
fruits, vegetables, and nuts from $200 million in FY 2007 to $390 million in FY
2008, $393 million in 2009, $399 million in 2010, $403 million in 2012, and $406
million each year thereafter. A significant portion of the additional purchases
of these products will be directed to schools, with the remaining funds used for
other domestic nutrition assistance programs.
In conclusion, I want to reiterate USDA’s commitment to help
ensure that no one in America goes hungry. We recognize that our nutrition
assistance programs, especially the NSLP, are critical to ensuring our children
get a good healthy meal. State and local agencies play a vital role in ensuring
the effective and efficient preparation of nutritious school meals, the
healthier alternative, for our children. We will continue to work with our
State partners and local school districts to identify creative ways to maximize
their resources. I appreciate the opportunity to testify before the Committee
today and would be happy to answer any questions.
Last modified:
11/26/2008 |