Streamlining School Lunch?

The Congressional Budget Office (CBO) is currently working on their 2009 “Budget Options” publication. This report, which is published in odd numbered years, contains cost or savings estimates for numerous possible changes to federal programs.

In the last three publications, CBO estimated the cost of a significant change to the Child Nutrition Program – eliminating federal reimbursement to school districts for full-price breakfasts and lunches for students whose family incomes are more than 350 percent of poverty. At the same time, it would increase the reduced-price breakfast and lunch subsidy by $0.20.

In 2007 CBO estimated that such a change would save more than $2.5 billion over five years and better “target” federal funding to poor children. While the report recognized this change could undermine the finances of school nutrition programs, it failed to discuss the cost of identifying students whose families make more than 350 percent of poverty.

The National Child Nutrition Program provides free and reduced priced meals to low-income children before, during, and after school, and over the summer. The federal government reimburses districts at a flat rate for each meal served based on the family income level of the student receiving the meal. Students from families with incomes below 130 percent of the poverty line receive free meals, students from families with incomes below 185 percent of poverty receive reduced-price meals, and all other students receive full-price meals.

Reimbursement rates, set each year by federal formula, for lunch are as follows: $2.57 for free lunches, $2.17 for reduced-price lunches, and $0.24 for full-price lunches, which are available to all students regardless of income.

CBO should recognize that identifying students whose family incomes are 350 percent or more of the poverty line will increase the cost and burden of providing school meals. Currently, schools and districts identify students eligible for free or reduced-price meals through an annual two step process. Initially, they “directly certify” students using participation in TANF or food stamps as an indicator of eligibility. This process identifies roughly 25 percent of the eligible population.

Districts identify the remainder of the eligible population through paper applications. Parents who wish to enroll their children in free or reduced-price meals must fill out the application and report their income to determine eligibility. This process is both time consuming and costly for schools and districts. So much so that the federal government offers two provisions that allow districts with particularly large percentages of qualifying students to stagger enrollment processes to reduce cost.

Identifying students that are 350 percent or more above poverty in addition to those students who qualify for free or reduced-price lunch would likely occur through an extended paper application process. But wealthy families have no incentive to self-report income and disqualify themselves from the full-price subsidy. Never mind that requiring such a process would present a great administrative and bureaucratic obstacle for schools and districts already bogged down with paper applications. This added step to the application process would surely increase administrative costs just as the subsidy to offset those costs is eliminated.

If the federal government wants to save money by limiting the full-price subsidy, it is more efficient to eliminate it for all full-price meals, not just those purchased by students above 350 percent of the poverty line. But they should know that this change would increase the price students pay for meals, lowering the number of full-price meals distributed and the revenues brought in as a result. The impact on the quality and quantity of free and reduced-price meals would likely be significant.

The Budget Option report is meant to inform the debate on various policy changes. In this vein, CBO should replace its current school nutrition piece with an estimate of the cost or savings associated with including Medicaid data as a potential source for direct certification. The inclusion of such data would increase the number of eligible students identified through direct certification, lessening the burden of the paper application process on schools and districts, and lowering administrative costs in the long run.

Making school nutrition programs more effective and efficient is a worthy goal. But the current CBO Budget Option plan really doesn’t cut the mustard.