The Food and Nutrition Service (FNS), an arm of the U.S. Department of Agriculture, distributes school lunch grant funds to states. State school lunch grants are based on the number of meals of each type distributed within the state in the previous fiscal year (free, reduced price, and paid lunch, as well as milk, snacks, and breakfast) multiplied by the federally set reimbursement rate for each type of meal.
In order to receive federal funding for school lunch programs, states are required to contribute matching funds equal to 30 percent of the federal funds they received in 1980. Because the matching funds are frozen at 1980 levels, state-required contributions are often very small relative to the federal reimbursement level. There is an exception for states with per capita income below the national per capita income, however. For these states, the required match is decreased by the percentage by which the state per capita income is below the per capita income of the United States. For example, if Texas’ per capita income were 2 percentage points lower than the national per capita income, Texas would be required to match 28 percent of school lunch funding rather than 30 percent.
States use federal funds to reimburse local school food authorities, on a monthly or quarterly basis, based on their records of lunches served in the previous month or quarter. The total amount of reimbursement a school food authority receives is calculated by multiplying the number of lunches of each type provided (free, reduced price, or paid) by the federally set reimbursement rates. School food authorities that serve jurisdictions where 60 percent or more of students qualify for free or reduced price lunch are allotted an additional two cents per meal.
In addition to school lunches, milk, snacks, and breakfasts, some school food authorities provide commodity foods, such as apples and oranges, to schools that request them, and also receive an added subsidy. These commodities are currently reimbursed at a rate of23.25 cents each.
Reimbursement rates are updated at the beginning of each fiscal year based on the Consumer Price Index value for Food Away from Home for All Urban Consumers:
The Department of Agriculture also donates commodity foods to schools in times of crop surpluses.
Reimbursement rates are slightly higher for Hawaii and Alaska.