	Background

		Structure of National School Lunch and Breakfast Programs

The National School Lunch Program was established in 1946 and the  School Breakfast Program was established in 1975 to provide nutritionally  balanced, low-cost or free lunches and breakfasts to children in  participating schools. Participating schools provide free  meals to all children, regardless of their household income. (See table  2.) Existing Data and Methods for Adjusting for Geographic Variations Could Lead to Shifts in Eligibility and Might Increase Program Costs

		Existing Federal Data Sources Are Available to Adjust School Meal Eligibility Based on Geographic Differences, but They Have Weaknesses

We identified two indexes that satisfied key considerations during our  process of reviewing data sources to identify those that could be used to  adjust eligibility guidelines for federal school meal programs for  geographic differences in the cost of living. Effects from Any Adjustments to Income Eligibility Are Hard to Predict, but They Could Increase Overall Costs and Have Negative Implications for Some Participants

			Changes in Eligibility, Participation, and Costs

Adjusting eligibility thresholds based on geographic differences could  result in increased or decreased eligibility, participation, and costs,  depending on the cost of living in a given area and how adjustments are  applied. At the same time, in states  where the cost of living is lower than average, according to the indexes,  such as the South and Midwest, eligibility thresholds would be lower and  fewer children would qualify for the program. For example, one consideration is whether to make adjustments at the  state or sub-state level. Implications for Food Security

However, children who no longer qualify for free or reduced-price school meals and  who cannot pay for school meals may be provided meals or partial meals at some  schools, but USDA does not reimburse schools for such meals. In the 2012-2013 school year 14.7 million children were  identified as categorically eligible for free or reduced-price meals. The Cost of Delivering School Meals Varies by Geographic Region, but the Usefulness of Existing Data to Adjust Reimbursements for These Differences Is Unclear

		School Foodservice Costs Can Vary Depending on School Size, School District Decisions, and Location

USDA studies have shown that there are multiple cost drivers that affect  schools’ foodservice costs differently. Similarly, available geographic foodservice wage data may not reflect  costs for school foodservice labor. USDA Has Discretionary Authority to Adjust Reimbursement Rates for Geographic Differences in Alaska, Hawaii, and U.S. Some states provide additional school meal reimbursement using state  funds. We determined that the Regional Price Parities (RPP) and Supplemental  Poverty Measure (SPM) best satisfied these considerations and we chose  to further discuss in this report how these methods could be used to  adjust for variations in the cost of living for U.S. Department of Agriculture  (USDA) school meal income eligibility and the implications of doing so. The food and wage composite index was calculated for each state as  follows  [{(state RPP food goods index/100) x (proportion of average school  food costs/total proportion of average labor and food costs)} + {(state  BLS wage/national BLS wage) x (proportion of labor costs/total  proportion of labor and food costs)}]  For example, to determine the composite index for the state of Alabama:  To show the change to the free school lunch reimbursement rate, 1.0 was  subtracted from the composite index and then multiplied by the 90.1  percent proportion of the $2.93 free lunch reimbursement rate, as follows  To illustrate the change to the free lunch reimbursement rate for  Alabama:  This illustration shows that in the 2013-2014 school year Alabama  schools would have received 18.6 cents less in reimbursement for a lunch  served to a child eligible for a free lunch.
Why GAO Did This Study

In fiscal year 2013, 30.7 million children participated in the National School Lunch Program and 13.2 million children participated in the School Breakfast Program, partly funded by $14.6 billion from the USDA. The majority of these children came from low-income families and received school meals free or at a reduced-price. Income eligibility and school reimbursement rates for school meals are federally set and do not consider geographic differences in the cost of living (except for Alaska and Hawaii). GAO was asked to explore the potential to account for such differences through a variety of measures and cost data.
This report, therefore, looks at a variety of methods by which to identify geographic differences in living costs and the potential for using them to adjust (1) income eligibility thresholds, and (2) reimbursement rates for schools. It also examines the extent to which states and localities can make adjustments for geographic differences in costs by using existing program rules. GAO reviewed relevant laws, regulations, and literature; analyzed available data sources and methods; and interviewed knowledgeable experts.

What GAO Found

There are a number of measures by which income thresholds for the U.S. Department of Agriculture (USDA) school meal programs could be adjusted to account for geographic differences in the cost of living; doing so would likely lead to shifts in eligibility and program costs. For example, the Supplemental Poverty Measure or Regional Price Parities could be used to adjust for geographic price differences; each could result in fewer children qualifying for assistance in the South and Midwest and more children qualifying in the Northeast (see figure below). In general, the effects of any such cost-of-living adjustment are difficult to predict and would vary depending on their implementation, such as whether they were applied state-wide or at the sub-state level, or whether children were kept from losing eligibility. Overall program costs could increase if more children participated.
Although the cost of delivering school meals varies by geographic region, the usefulness of available cost data is unclear for making such adjustments. Neither the Regional Price Parities for food services and goods or the U.S. Bureau of Labor Statistics' wage data account for some drivers of variation in costs, such as economies of scale. In addition, they may not reflect the characteristics of the food and labor components of individual school districts.
The national school lunch and breakfast program rules allow states to expand eligibility for free meals and increase reimbursements to schools using federal or state funds. Some schools have expanded eligibility by providing free meals to all students under federal program rules. At the same time, some states use state funds to provide additional per meal reimbursements to schools for meals served. However, no state has used these flexibilities to adjust for within state geographic differences.

What GAO Recommends

GAO is not making any recommendations.