2
The School Meals Programs

This chapter describes criteria for eligibility and the process for application, certification, verification, participation, meal counting, and reimbursement in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). It is essential to understand all elements of the school meals programs to be able to consider alternative procedures that could reduce administrative burden and make it possible to provide nutritious meals to a greater number of the nation’s school-age children.

CONCEPTUAL FRAMEWORK

Figure 2-1 illustrates the flow of the process from determining the eligibility of students to serving them nutritionally qualified meals, noting that there are different distributions of students and meals served across the free, reduced-price, and full-price meal categories at each point. The first two boxes and the first oval in the figure reflect distributions based on all enrolled students; the second oval and last box relate to average daily meals served. For simplicity, we have assumed that the process depicted in the figure occurs instantaneously1 and have ignored how the distributions and the relationships among them change over time.

1

As discussed below, a student paying full price at the beginning of the school year can be approved for free meals later in the year if, for example, the family’s income falls. Once approved, the student can continue to receive free meals for the remainder of the year (and up to 30 days into the next year), even if the family’s income rises above the eligibility threshold for free meals.



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2 The School Meals Programs T his chapter describes criteria for eligibility and the process for applica- tion, certification, verification, participation, meal counting, and reim- bursement in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). It is essential to understand all elements of the school meals programs to be able to consider alternative procedures that could reduce administrative burden and make it possible to provide nutritious meals to a greater number of the nation’s school-age children. CONCEPTuAL FRAMEWORK Figure 2-1 illustrates the flow of the process from determining the eligibility of students to serving them nutritionally qualified meals, noting that there are different distributions of students and meals served across the free, reduced-price, and full-price meal categories at each point. The first two boxes and the first oval in the figure reflect distributions based on all enrolled students; the second oval and last box relate to average daily meals served. For simplicity, we have assumed that the process depicted in the figure occurs instantaneously1 and have ignored how the distribu- tions and the relationships among them change over time. 1 Asdiscussed below, a student paying full price at the beginning of the school year can be approved for free meals later in the year if, for example, the family’s income falls. Once approved, the student can continue to receive free meals for the remainder of the year (and up to 30 days into the next year), even if the family’s income rises above the eligibility threshold for free meals. 

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 THE SCHOOL MEALS PROGRAMS ET: All Students—True Eligibility (Unobserved) Certification process CT: Approved Students—Truth (Unobserved) Certification errors CO: Approved Students—Observed Participation MO: Meals Served—Observed Under Traditional Approach Participation Response to Universal Free Meals MU: Meals Served—Universal Free Meals (Unobserved) FIguRE 2-1 School meals process and distributions of enrolled students and meals served across free, reduced-, and full-price categories: traditional approach and universal free meals. Figure 2-1 R01752 The top box in the figure, labeled “ET: All Students—True Eligibility (Unobserved),” represents the distribution of all enrolled students by their true eligibility status, including those who are eligible for free meals using program rules described below, those who are eligible for reduced-price meals using program rules, and all other students, who are eligible for full-price meals. As noted, this distribution is not observed. The process by which students are identified and approved as being eligible for free or reduced-price meals is known as certification.2 Students 2 The certification process encompasses both direct certification and the solicitation, sub - mission, and review of applications.

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4 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS who are found to be eligible through the certification process become approved students. The second box in the figure, labeled “CT: Approved Students—Truth (Unobserved),” represents the distribution of all enrolled students accord- ing to a certification process with no errors. Some students who are eligible for free or reduced-price meals decline to participate in the certification process (or the verification process). All students who either do not apply or are not directly certified for free meals are eligible for full-price meals, as are those students who apply but are found to be ineligible for free or reduced-price meals. The distribution, CT, is not observed. The number of students in the free category of CT will be less than or equal to the number in the free category of ET by the number of students who were not directly certified and who did not apply for benefits. These students will be in the full-price category of CT. Likewise, students in the reduced-price category of ET who did not apply will be in the full-price category of CT. The first oval in the figure (third item), labeled “CO: Approved Stu- dents—Observed,” represents the distribution of enrolled students into categories of approved for free meals, approved for reduced-price meals, and eligible for full-price meals, in which the categories of approved for free or reduced-price meals are as determined by the actual operation of the certification process and maintained in school records. The certifica - tion process is described below. The difference between CT and CO is due to misclassification of students (errors) during the certification process. For example, some students who are eligible for free meals may have been approved for reduced-price meals. On any given day, a student may bring a meal from home or purchase a meal that does not qualify for reimbursement because it does not satisfy the nutritional requirements of the school meals programs. Hence, schools must count the total number of reimbursable meals served each day and note whether each child taking a meal is approved for a free or reduced- price meal or must pay full price. The last two distributions in Figure 2-1 reflect the distribution of average daily reimbursable meals served across the three categories. The second oval in the figure (fourth item), “MO: Meals Served— Observed Under Traditional Approach,” represents the distribution of meals served (across the free, reduced-, and full-price categories) in a school that uses the traditional procedures for certifying students and claiming reimbursement. While some students never participate (take meals) or participate on only some days, others participate every day. When students line up in the cafeteria with their trays, a cashier deter- mines whether each meal served qualifies as reimbursable under the school meals programs in terms of food group composition, serving size, etc. The cashier also determines whether the child is approved for a free or

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 THE SCHOOL MEALS PROGRAMS reduced-price meal in a way that ensures there will be no overt identifica- tion of the student’s eligibility category.3 This process provides the meal counts maintained in school records that are used to determine federal reimbursements in the school meals programs. The third box in the figure (fifth item), “MU: Meals Served—Universal Free Meals (Unobserved),” represents the participation distribution when meals are provided for free to all students. The distribution is unobserved because meals are not counted by category when they are provided for free under a special operating provision, such as Provisions 2, 3, or 4. The available evidence suggests that if meals were provided at no cost, more students would participate. This distribution is important in assess - ing the costs and benefits of a new provision, and the ultimate objective of the panel is to determine whether there is a reliable and operationally feasible method for estimating this distribution for a school, group of schools, or school district using available data. ELIgIbILITy Students are eligible for free school meals if their family’s “current” income is at or below 130 percent of the poverty guideline for their family size. Current income requested on the application form “may be for the current month, the amount projected for the first month the application is made for, or for the month prior to application.”4 Students are “cat- egorically eligible” for free meals if someone in the family participates in certain other means-tested public assistance programs targeted for the low-income population. Specifically, students are categorically eligible for free meals if their families receive assistance from the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program), Temporary Assistance to Needy Families (TANF), or the Food Distribution Program on Indian Reservations (FDPIR). A student is also categorically eligible if he/she is enrolled in a Head Start or Even Start Program, or if the student is (1) a homeless child as determined by the school district’s homeless liaison or by the director of a homeless shelter, (2) a migrant child as determined by the state or local Migrant Education Program 3 The Richard B. Russell National School Lunch Act (Section 9B(10), pp. 3-22) states: (10) No physical segregation of or other discrimination against any child eligible for a free lunch or a reduced price lunch under this subsection shall be made by the school nor shall there be any overt identification of any child by special tokens or tickets, announced or published list of names, or by other means, see http://www.fns.usda. gov/cnd/Governance/Legislation/NSLA-10-2008.pdf [accessed May 2010]. 4 See Eligibility Manual for School Meals: Federal Policy for Determining and Verifying Eligi - bility, see http://www.fns.usda.gov/cnd/Governance/notices/iegs/EligibilityManual.pdf [accessed June 2010].

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 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS coordinator, or (3) a runaway child who is receiving assistance from a program under the Runaway and Homeless Youth Act and is identified by the local educational liaison. Students who are not eligible for free meals are eligible for reduced- price meals if their family’s “current” income is greater than 130 percent of the poverty guideline and at or below 185 percent of the poverty guide- line. All other students are eligible for full-price meals.5 CERTIFICATION Certification is the process by which students are approved as being eligible for free or reduced-price meals. There are two types of certification: direct certification and the solicitation, submission, and review of applica - tions. School districts, usually through their state agency, directly certify “categorically eligible” students based primarily on their participation in SNAP, TANF, and FDPIR. The 2004 Child Nutrition and WIC Reautho- rization Act required that all school districts establish a system of direct certification of students from households that receive SNAP benefits by school year (SY) 2008-2009. Some states or districts also make use of TANF or other program data as part of direct certification. For direct certification, states or districts match lists of students (including names, addresses, etc.) with the administrative data concerning individuals participating in SNAP or other assistance programs. Students matched in this way are “directly certified” as being eligible for free school meals. Parents are notified that their students are eligible and do not need to file an application. Matching for direct certification is done at least once a year. Some states conduct direct certification more frequently to identify newly eligible students. For example, Washington State conducts direct certification monthly. As dis- cussed below, certification for free meals remains effective for the rest of the school year and for up to 30 days into the next school year. Through direct certification, an estimated 71 percent of students from SNAP-participant households nationwide were certified for free school meals in SY 2008-2009 without applications.6 Due to errors in record matching or participation in a program for which a state does not perform direct certification, some categorically eligible students are not directly certified. Families of such students can establish their categorical eligibility by providing a SNAP, TANF, or FDPIR case number on their application for school meals. 5See Eligibility Manual for School Meals: Federal Policy for Determining and Verifying Eligi - bility, see http://www.fns.usda.gov/cnd/Governance/notices/iegs/EligibilityManual.pdf [accessed June 2010]. 6 In some states, direct certification rates were nearly 100 percent (U.S. Department of Agriculture, Food and Nutrition Service, 2009).

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 THE SCHOOL MEALS PROGRAMS Just prior to and at the beginning of a school year (normally mid-July through early September), school districts send a letter to the parents of their students describing the school meals programs, inviting them to apply, and providing an application form. The application requests infor- mation about participation in SNAP or other assistance programs, family composition, and family income. School or district officials review the applications and make a determination about whether the child should be approved for free or reduced-price meals. If an application lists a legiti- mate case number for SNAP or other approved program, the student is certified as being categorically eligible for free meals. While most applications are submitted at the beginning of the school year, applications and eligibility are in effect from the date of approval for the entire school year and up to 30 operating days into the subsequent school year. A family may submit an application at any time during the year and may do so later in the year if, for example, its income changes or it starts participating in SNAP or TANF. The distribution of approved students by category for the school meals programs in fiscal year (FY) 2005-2009 is shown in Table 2-1. This is the CO distribution in Figure 2-1. Not all families with students who are eligible for free or reduced- priced meals submit applications. The Food and Nutrition Service (FNS) reported that “available data indicate that between 16 percent and 25 percent of potentially eligible families do not apply for school meals benefits” (U.S. Department of Agriculture, Food and Nutrition Service, 1994a). Although this may no longer be true in light of incentives (such as the allocation of funds in other programs) and processes (such as direct certification) for certifying as many eligible students as possible for free meals, more recent estimates are not available. TAbLE 2-1 Percentage of Enrolled Students by Approval Status for School Meals Programs, FY 2005-2009 Fiscal Approved for Approved for Must Pay Year Free Meals Reduced-Price Meals Full Price for Meals 2009 40.2 8.7 51.1 2008 37.9 8.6 53.5 2007 37.1 8.3 54.6 2006 37.8 8.4 53.8 2005 37.1 8.1 54.8 NOTE: Approval status for school meals programs includes both the National School Lunch Program and the School Breakfast Program. SOURCE: Tabulation from the Food and Nutrition Service National Data Bank provided to the panel, February 4, 2010.

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 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS TAbLE 2-2 Number of Students Eligible for NSLP from Two Sources: (1) CPS Estimates Based on Annual Income and (2) NSLP Certifications for Free and Reduced-Price Meals (in thousands), 1993-1999 Free Lunch Free and Reduced-Price Lunch CPS- Certified/ CPS- Certified/ Income NSLP Eligible Income NSLP Eligible Year Eligible Certified (%) Eligible Certified (%) 1999 12,464 15,876 127 18,928 19,260 102 1998 13,128 15,965 122 19,190 19,067 99 1997 13,461 15,799 117 19,416 18,762 97 1996 13,382 15,415 115 19,727 18,273 93 1995 13,655 14,920 109 20,030 17,577 88 1994 13,718 14,396 105 19,609 16,952 86 1993 13,924 13,792 99 19,750 16,273 82 SOURCE: U.S. Department of Agriculture, Food and Nutrition Service (1999:3, 5). An FNS study enabled a comparison of the distributions of eligible and certified students (U.S. Department of Agriculture, Food and Nutri- tion Service, 1999). It used data from the Current Population Survey (CPS) to estimate the percentage of students who were income eligible for free and reduced-price meals, providing a survey-based estimate for ET (Fig- ure 2-1), with eligibility based on annual income data. These estimates were compared with the numbers of students approved as being eligible for free or reduced-price meals, CO. Table 2-2, taken from that report, indicates that the number of students certified was growing from 1993 through 1998, whereas the number eligible according to annual income was flat or declining. By 1998, the number of students approved for free meals was 127 percent of the number of students who were estimated as being income eligible for free meals, and the number of students approved for free or reduced-price meals was 102 percent of the number of students who were estimated as being income eligible for free or reduced-price meals. These results were interpreted as evidence that there was over- certification in the school meals programs and contributed to the passage of the Improper Payments Act of 2002, which requires that various fed- eral agencies identify and reduce erroneous payments in their programs (National Research Council, 2009:14).7 Subsequent research found that at 7As discussed in Chapters 3 and 5 of the National Research Council report, estimates of eligibility based on annual income are likely to be too low, given that families may have 1 or more months of low income that would qualify them for free or reduced-price meals even when their annual income exceeded the income eligibility limits.

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 THE SCHOOL MEALS PROGRAMS least some of the difference between estimated income eligibility from the CPS and approval status under the school meals programs may be due to how income relative to poverty is measured (annual or monthly) and to changes in monthly income from the time of application to the time of verification (U.S. Department of Agriculture, Economic Research Service, 2006b). In response to the Improper Payments Act, FNS funded the Access, Participation, Eligibility, and Certification (APEC) study in 2004 to obtain national estimates of the amounts and rates of erroneous payments in the NSLP and the SBP (U.S. Department of Agriculture, Food and Nutri- tion Service, 2007b). Erroneous payments may arise because of certifica - tion errors due to household reporting, administrative mistakes, or non- certification errors in counting and claiming payment for reimbursable meals. The study used a complex sample design to survey school districts, schools, and students. The APEC study provided baseline estimates of erroneous payments for SY 2005-2006. It also provided parameters for estimation models to allow FNS staff to update estimates of erroneous payments. The study found that 77.5 percent of all certified students and denied applicants were correctly certified or denied meal benefits, whereas 22.5 percent were certified in error or erroneously denied benefits. It also found that over- certification was more common than undercertification—the percentage of students certified for a higher level of benefits than that for which they were eligible (the overcertification rate) was 15 percent; the percentage of students either certified for a lower level of benefits than that for which they were eligible or erroneously denied benefits (the undercertification rate) was 7.5 percent. More detailed results from the APEC study are dis- cussed in Chapter 6. vERIFICATION In addition to special studies, such as the APEC study, school districts are required to annually verify a sample of NSLP and SBP applications. Typically, a school district is required to conduct an annual verification of 3 percent or 3,000 (whichever is smaller) of the applications approved and on file as of October 1 of the current school year.8 Verification is to be completed by November 15 of the current school year. Samples are to be selected from “error prone” applications, which are those with reported monthly income within $100 of a school meals eligibility thresh- old (130 percent or 185 percent of the applicable poverty guideline). The households that submitted the applications selected for verification are 8 In some states, the state agency conducts the verification.

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0 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS required to submit documentation of income for any point in time between the month prior to application and the time of verification. School districts make at least one follow-up attempt with households that do not respond. The students in households that fail to provide the required documenta- tion are removed from eligibility. Results of the outcomes of verification studies are reported annually on Form FNS-742. Data for each school dis - trict are reported via state agencies to FNS regional offices, which upload the data to FNS headquarters, where they are maintained. PARTICIPATION Any child attending a school that participates in the school meals programs may obtain a meal. Cashiers assess which meals meet the nutri- tional requirements of the NSLP and the SBP and, for qualifying meals, record each student’s approval status (free, reduced price, full price) in a way that does not overtly identify the student’s status. Meal counts are aggregated to the school, to the school district, and to the state. This process provides the meal counts maintained in school records, which are also reported to FNS via Form FNS-10. FNS defines participation as the 9-month (September-May) average of each month’s average daily meals served, divided by an attendance factor of .927 to account for school absenteeism.9 Table 2-3, from a special tabulation from the FNS National Data Bank, shows participation (aver- age daily number of meals served divided by .927) in the NSLP by year and the percentage of meals served that were free, reduced price, or full price. The percentage distribution is MO in Figure 2-1. Another way of looking at participation is by meal category (see Table 2-4). Dividing participation (average daily number of meals served by category divided by .927) in a month by the total number of enrolled students approved in that category shows consistently higher participa- tion by students approved for free meals, followed by students approved for reduced-price meals, followed by students having to pay full price. While the participation rates in Table 2-4 are based on meals served divided by .927 (in the numerator), similar national rates are obtained when participation is measured by the number of approved students who take meals. As discussed in the FNS report School Lunch Eligible Non- Participants (U.S. Department of Agriculture, Food and Nutrition Service, 1994a:I-5): [S]ome children who are approved to receive free or reduced-price meals do not always obtain the meals. Previous studies have shown that stu - 9 See http://www.fns.usda.gov/pd/cnpmain.htm [accessed May 2010].

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 THE SCHOOL MEALS PROGRAMS TAbLE 2-3 Official NSLP Participation (average daily meals divided by .927) and Percentage of Lunches Served by Approval Category, FY 2005-2009 Percentage of Lunches Served Fiscal Year NSLP Participation Free Reduced Price Full Price 2009 31,227,700 52.0 10.1 37.9 2008 31,015,182 49.6 10.1 40.3 2007 30,513,236 48.9 10.0 41.2 2006 30,132,869 49.0 9.8 41.2 2005 29,646,189 49.2 9.7 41.1 SOURCE: Tabulation from the Food and Nutrition Service National Data Bank provided to the panel, February 4, 2010. TAbLE 2-4 NSLP Participation (average daily meals divided by 0.927) by Approval Category, FY 2005-2009 Participation Rate (Percentage) Fiscal Year Free Reduced Price Full Price 2009 80.0 72.1 46.0 2008 80.7 72.2 46.4 2007 80.5 73.3 46.1 2006 78.5 70.8 46.3 2005 79.1 71.5 44.9 SOURCE: Tabulation from the Food and Nutrition Service National Data Bank provided to the panel, February 4, 2010. dent participation rates (the percentage of students in a given group who take or purchase a meal on a typical day) are about 80 percent for stu - dents approved for free meals, about 70 percent for students approved for reduced-price meals, and about 45 percent for students who pay full price. Participation rates decline considerably as students get older. More recent information on participation is available from the School Nutrition Dietary Assessment Study-III (U.S. Department of Agriculture, Food and Nutrition Service, 2007a). The main focus of the study was to look at the nutritional content of school meals and to identify student and parent reasons for participation or nonparticipation. This study used the following two definitions of participation: (1) percentage of enrolled students who took a meal that qualified under the school meals program on a target day, and (2) the percentage who “usually” took such a meal, with “usually” defined as 3 or more days per week.

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 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS On a typical day in SY 2004-2005, about 62 percent of all students participated in the NSLP and about 18 percent participated in the SBP. Nearly three-quarters of students reported participating in the NSLP 3 or more days per week, and one-quarter reported participating in the SBP 3 or more days per week. Parents of students who did not participate in the NSLP reported some of the same reasons as students did for this decision—for example, that their child did not like the cafeteria food (68 percent) or preferred to bring a lunch from home (65 percent). Table 2-5 shows participation rates according to the first definition sep- arately for elementary, middle, and high school students by income level and reported receipt of free or reduced-price meals (official approval status was not determined). The table shows that about 87 percent of all elemen- tary school students with family income less than or equal to 185 percent of poverty (that is, students income eligible for either a free or a reduced- price meal) participated in the school lunch program on the target day, and 62 percent of all elementary school students with family income more than 185 percent of poverty participated in the school lunch program. For middle school students, participation rates were lower than for elementary school students in all three income categories; participation by those eligible for a reduced-price meal fell in between participation for those eligible for a free meal and those not eligible for either a free or a reduced-price meal. For high school students, participation rates were lowest of all, except that the participation rate of high school students eligible for a reduced-price meal was no lower than the corresponding middle school participation rate TAbLE 2-5 Target Day Participation Rates in the NSLP (percentage of enrolled students) from the School Nutrition Dietary Assessment Study-III—by Income Level, Meal Category, and School Level All Income/Meal Category Elementary Middle High Students Income Relative to Poverty Guideline: Less than or equal to 130 percent 86.9 71.7 55.5 75.7 Between 130 and 185 percent 86.5 63.5 64.1 75.5 More than 185 percent 62.1 54.6 36.3 52.6 Receipt of Meals (parent report): Receives free or reduced-price 86.5 70.7 66.4 78.8 meals Does not receive free or 60.1 51.9 34.3 49.6 reduced-price meals SOURCE: U.S. Department of Agriculture, Food and Nutrition Service (2007a:vol. II, p. 36).

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 THE SCHOOL MEALS PROGRAMS and higher than the participation rate of high school students eligible for a free meal. The main objective of our panel is to recommend a method for estimat- ing the unobserved distribution in Figure 2-1 labeled “MU: Meals Served— Universal Free Meals (Unobserved).” This distribution reflects what would happen in the future if a district adopted free meals for all students through a new approach that used available data, such as those from the American Community Survey (ACS), to establish claiming percentages for reim- bursement from the U.S. Department of Agriculture (USDA). A student who was approved for a reduced-price meal would save 40 cents per meal with universal free meals, and a student who would otherwise pay for a meal would save the entire amount that was charged by the school district. Consequently, one might expect the rate of increased participation from providing free meals to all students to be greatest for students who formerly had to pay for their meals, followed by reduced-price-eligible students, followed by students already eligible for free meals. COuNTINg, CLAIMINg, AND REIMbuRSEMENT The meal counting process begins when the cashier determines whether a child’s meal qualifies as a reimbursable meal (by satisfying the nutritional requirements described in Chapter 1)10 and whether the child is approved for a free meal or a reduced-price meal or must pay full price. As noted above, a student’s approval status cannot be overtly identified by this process. Thus, for example, all students taking a reimbursable school meal must go through the same cashier’s line, regardless of eligibil- ity status. According to the APEC report (U.S. Department of Agriculture, Food and Nutrition Service, 2007b:vol. I, p. 16): [T]o obtain meal reimbursements, school personnel must accurately count, record, and claim the number of reimbursable program meals actually served to students by category—free, reduced-price, and full price (except for schools using Provision 2 or 3 in nonbase years). To do this, school districts must put in place a system that issues benefits, records meal counts at the school’s point of service, and reports them to the central district office. The district must receive reports of meal counts from the schools, consolidate them, and submit claims for reimburse- ment to its state agency. The state reports monthly aggregates to FNS on Form FNS-10. These data are used by FNS to determine reimbursements due to the states. The states distribute the reimbursement to the school districts. 10 That is if the meal satisfies the nutritional requirements described in Chapter 1.

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4 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS TAbLE 2-6 Federal Reimbursement Rates for 2009-2010 School Meals Programs by Eligibility Category Lunch Breakfast Eligibility Category Rate Rate Free (income at or below 130% of poverty guideline) $2.68 $1.46 ($2.70) ($1.74) Reduced Price (income 130 to 185% of poverty guideline) $2.28 $1.16 ($2.30) ($1.44) Full Price (income greater than 185% of poverty guideline) $0.25 $0.26 ($0.27) ($0.26) NOTE: Dollar amounts in parentheses are reimbursement increments for schools serving large proportions of free and reduced-price meals (see text). SOURCE: See http://www.fns.usda.gov/cnd/Governance/notices/naps/nsl09-10t.pdf [ac- cessed June 0210]. Most of the support USDA provides to schools in the NSLP and the SBP comes in the form of a monthly cash reimbursement for each meal served. Table 2-6 shows reimbursement rates by eligibility category for SY 2009-2010. (Rates may be adjusted at the beginning of each school year.) Schools that served more than 60 percent free and reduced-price lunches 2 years earlier are eligible for 2 cents more per category for the NSLP (shown in parentheses in the table); schools that served more than 40 percent free and reduced-price lunches are eligible for higher severe-needs rates for the SBP (shown in parentheses in the table). Higher reimbursement rates are also in effect for Alaska and Hawaii. SPECIAL PROvISIONS FOR OPERATINg THE SCHOOL MEALS PROgRAMS For determining claiming percentages for reimbursement from USDA for free, reduced-, and full-price meals, schools, groups of schools, or entire school districts may choose to participate in one of three special provisions instead of following the traditional procedures for eligibility determination and meal counting. Typically, they apply for these provi- sions through the state. These provisions are most appropriate for areas with high percentages of students eligible for free or reduced-price meals. Provisions 1 and 2 were approved in federal regulations in 1980. Provision 3 was approved in regulations in 1995. Provisions 1, 2, and 3 Provision 1 permits schools enrolling at least 80 percent of students who are eligible for free or reduced-price meals to certify students’ eligi -

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 THE SCHOOL MEALS PROGRAMS bility for free meals for 2 years instead of reestablishing eligibility every year. There are currently very few schools operating under Provision 1. Provision 2 permits schools, groups of schools, and entire school districts to establish claiming percentages for federal reimbursement via information collected during a base period and to serve all meals at no charge for a 4-year period. The first year is the base year, during which the school makes eligibility determinations, conducts verifications, and takes meal counts by type (but does not charge for any meals). During the next 3 years, the school makes no new eligibility determinations or verification checks and counts only the total number of reimbursable meals served each day.11 Reimbursement during these years is determined by applying the percentages of free, reduced-, and full-price meals served during the corresponding month of the base year to the total count of reimbursable meals for the claiming month. The base year is included as part of the 4 years. At the end of each 4-year period, the state agency may approve a 4-year extension if the income level of the school’s population remains stable.12 Some schools use Provision 2 only for the SBP. These schools still collect applications, make eligibility determinations, and perform verifica- tions for households with students that participate in the NSLP. Provision 3 permits schools, groups of schools, and school districts to receive the same level of federal cash and commodity assistance each year during a 4-year period, with some adjustments. The base year is the last year the school made eligibility determinations and counted reimburs - able meals by type. For the subsequent 4-year period, schools must serve meals to all participating students at no charge, and they do not make additional eligibility determinations or conduct additional verification checks. For each of the 4 years, the level of federal cash and commodity support is adjusted only to reflect changes in enrollment, the number of operating days, and inflation. Unlike Provision 2, the base year of Pro- vision 3 is not included as part of the 4 years, and schools may charge students for meals during the base year. At the end of each 4-year period, the state agency may approve a 4-year extension if the income level of the school’s population remains stable. Provision 1 offers the least reduction in paperwork and administra - tive burden of the three provisions. Provisions 2 and 3 offer greater reduc- tions in paperwork and administrative burden; in return, schools electing to use one of these two provisions must pay the difference between fed - 11 Under Provision 2, the total number of meals served does not need to be broken down by eligibility category. 12 The income level of a school is defined as stable if it does not improve by more than 5 percent, after adjusting for inflation, between the base year and the comparison year, and income is measured by the source of socioeconomic data used on the approved application for provision status to the state.

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 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS eral reimbursement and the cost of providing all meals at no charge from sources other than federal funds. According to the Food Research and Action Center, “Schools that have implemented Provision 2 or 3 have found that they can offset cost differentials with as few as 60 to 75 percent of students eligible for free- or reduced-price school meals.”13 According to the SNDA Study-III, 12.9 percent of schools used Provision 2 and 1.3 percent of schools used Provision 3 to provide free meals to all students in SY 2004-2005 (U.S. Department of Agriculture, Food and Nutrition Service, 2007b). Philadelphia Pilot Project FNS uses pilot projects to test alternative procedures in the school meals programs. One pilot project in the School District of Philadelphia is ongoing and is relevant to the panel’s work. This district has a hybrid system with one-third of schools operating under the traditional pro- cedures and two-thirds of schools providing free meals to all students and developing claiming percentages by combining information about students in households that were directly certified for free meals with information from a household survey designed to determine eligibility for free and reduced-price meals (Reinvestment Fund, 2007). The applica- tion and verification processes are eliminated for the no-fee schools. The steps in the process for estimating claiming percentages included direct certification, followed by a survey of nondirectly certified students. The direct certification and household survey data showed that 79.6 percent of the students attending the no-fee public schools were eligible for free or reduced-price meals. In the early 2000s, FNS commissioned the U.S. Census Bureau to conduct a study to develop eligibility estimates for schools in the School District of Philadelphia from the 2000 Census long-form sample (Geverdt, 2005), which the ACS replaces. Developing appropriate digitized school attendance boundaries was the most challenging part of obtaining esti - mates for school attendance areas and was undertaken in collaboration with officials in Philadelphia. The estimates from the decennial cen- sus were compared with the counts of students approved for free and reduced-price meals from the National Center for Education Statistics’ (NCES) Common Core of Data (CCD). The study found that, on average, the census estimated that 61 percent of students were eligible for free or reduced-price meals compared with 74 percent approved according to the CCD. Some of this difference is likely to be due to the difference between 13 See http://www.frac.org/html/federal_food_programs/cnreauthor/provision2.htm [accessed May 2010].

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 THE SCHOOL MEALS PROGRAMS eligibility as measured by annual income in the census and eligibility as measured by monthly income in the school meals programs. Alternative Reimbursement Formulas Under the traditional procedures for operating the school meals programs (and under Provision 1), federal financial assistance to school districts is calculated as the total number of reimbursable meals served to students approved as eligible for free, reduced-, or full-price meals multiplied by the applicable meal reimbursement rates. Thus, federal government outlays (G) for reimbursable meals under the NSLP or the SBP are G t = R fM ft + R rM rt + R pM pt where • Gt is the government outlay for reimbursable meals in month t, in dollars; • Rf is the reimbursement rate for free meals for this school year, in dollars (e.g., $2.68 for the NSLP in SY 2009-2010, if the school is not eligible for an increment); • Rr is the reimbursement rate for reduced-price meals for this school year, in dollars; • Rp is the reimbursement rate for full-price meals for this school year, in dollars; • Mft is the total number of free meals served in month t; • Mrt is the total number of reduced-price meals served in month t; • Mpt is the total number of full-price meals served in month t; and • Mt = Mft + Mrt + Mpt is the total number of reimbursable meals served in month t. Under Provision 2, the number of meals served by category, Mft, Mrt, and Mpt, in the school, group of schools, or school district are unknown because they are not counted, but the total, Mt, is known, and can be used along with counts of meals served by category during the same month of the base year to determine the reimbursement amount. Therefore, the reimbursement formula for Provision 2 is M f 0 ,t M p 0 ,t M r 0 ,t G2t = R f Mt + R r Mt + R p Mt M0 ,t M0 ,t M0 ,t

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 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS where • G2t is the government outlay for reimbursable meals served in month t in Provision 2 schools, in dollars; • Rf, Rr, and Rp are reimbursement rates as defined above; • Mt is the total number of reimbursable meals served during month t; • Mf0,t is the total number of free meals served in month t of the base year; • Mr0,t is the total number of reduced-price meals served in month t of the base year; • Mp0,t is the total number of full-price meals served in month t of the base year; and • M0,t = Mf0,t + Mr0,t + Mp0,t is the total number of reimbursable meals served during month t of the base year. The ratios in the equation above are the Provision 2 claiming percentages. Under Provision 3, meals served by category are estimated by using meals served in the same month of the base year multiplied by a factor reflecting the change in enrollment and inflation since the base year. Therefore, the reimbursement formula for Provision 3 is G3t = Rf dMf0,t + Rr dMr0,t + Rp dMp0,t where • G3t is the government outlay in month t for Provision 3 schools, in dollars; • Rf, Rr, and Rp are reimbursement rates as defined above; • Mf0,t is the total number of free meals served in month t of the base year; • Mr0,t is the total number of reduced-price meals served in month t of the base year; • Mp0,t is the total number of full-price meals served in month t of the base year; and • d is a ratio adjustment factor (ratio of current value to base year value) reflecting changes in enrollment and inflation. Philadelphia uses an enrollment-based method in conjunction with the traditional approach. About one-third of the schools (low poverty) operate under traditional procedures and about two-thirds of the schools (high poverty) provide free meals to all students and use claiming per- centages based on data from a socioeconomic survey combined with the number of directly certified students to estimate the percentage of

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 THE SCHOOL MEALS PROGRAMS enrolled students eligible for free, reduced-price, and full-price meals. The overall reimbursement formula is GtPhiladelphia = GtTraditional + Gtsurvey where • GtTraditional is the federal government outlay for one-third of the schools using the traditional application and meal counting and claiming procedures; and • Gtsurvey is the federal government outlay established for two-thirds of the schools operating no-fee programs as described below: Ef Ep Er G survey t = R f Mt + R r Mt + R p M Et E E where • Mt is the total number of reimbursable meals served in month t; • Rf, Rr, and Rp are reimbursement rates as defined above; • Ef is the number of enrolled students who have been directly certified or estimated as eligible for free meals from a survey of students’ families; • Er is the number of enrolled students who have been estimated as eligible for reduced-price meals based on a survey of students’ families; • E is the total student enrollment; and • Ep = E – Ef – Er is the number of enrolled students who are eligible for full-price meals. If sufficiently accurate estimates of eligibility can be derived from the ACS and other data, the following formula, similar to the formula used for the two-thirds of Philadelphia schools operating no-fee programs, was described to the panel by FNS as one that the agency would consider using to determine reimbursement for a school, group of schools, or an entire district that provides universal free meals under a new special pro - vision, which we term Provision 4: Ef Ep Er Ge 4t = R f Mt + R r Mt + R p M Et E E where • Ge4t is the government outlay for reimbursable meals served in month t in Provision 4 schools, based on eligibility estimates, in dollars;

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0 USING ACS DATA TO SUPPORT THE SCHOOL MEALS PROGRAMS Rf, Rr, and Rp are reimbursement rates as defined above; • • Mt is the total number of reimbursable meals served in month t; Ef is the estimated number of enrolled students who are eligible • for free meals based on the ACS and other sources; Er is the estimated number of enrolled students who are eligible • for reduced-price meals based on the ACS and other sources; • E is the estimated number of enrolled students in Provision 4 schools based on the ACS and other sources; and Ep = E – Ef – Er is the estimated number of enrolled students who • are eligible for full-price meals. In light of the differences between the distributions of students by eligibility category in Table 2-1 and the distributions of meals served by eligibility category in Table 2-3, a substantial concern with the pre- vious “enrollment-based” reimbursement equation—that is, an equation based on the distribution of enrolled students—is that it might be unfair to districts. Specifically, as illustrated in an example presented by FNS at the first meeting of the panel,14 districts might receive smaller reimbursements than they would with a “participation-based” equation, that is, an equation based on the distribution of meals served. Therefore, the panel will focus on a more general expression for the Provision 4 reimbursement formula:15 G p4t = R fC fM t + R rC rM t + R pC pM t where • Gp4t is the government outlay for reimbursable meals served in month t in Provision 4 schools, based on eligibility and participa- tion estimates, in dollars; • Rf, Rr, and Rp are reimbursement rates as defined above; • Mt is the total number of reimbursable meals served in month t; • Cf is the claiming percentage for free meals, an estimate for the fraction of reimbursable meals served to students eligible for free meals; 14 FNS gave a hypothetical example of a school with 70 percent of the students eligible for free meals, 10 percent eligible for reduced-price meals, and 20 percent eligible for full-price meals. But 77.7 percent of meals were served to students eligible for free meals, 10 percent of meals were served to students eligible for reduced-price meals, and 12.3 percent of meals were served to students eligible for full-price meals. In this example, the average reimburse- ment per meal based on the eligibility distribution is $2.17, while the average reimbursement per meal based on the participation (meals served) distribution is $2.36. (In this situation the school was eligible for the 2 cents per meal increment.) 15A special case of this formula uses the enrollment percentages from the previous formula to estimate the claiming percentages.

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 THE SCHOOL MEALS PROGRAMS Cr is the claiming percentage for reduced-price meals, an estimate • for the fraction of reimbursable meals served to students eligible for reduced-price meals; and Cp = 1 – Cf – Cr is the claiming percentage for full-price meals. • The claiming percentage16 for a category is the estimated fraction of reimbursable meals that will be served to students who are eligible for that category (however, meals will be provided free to all students). The three claiming percentages are the MU distribution in Figure 2-1, and, as noted above, the ultimate objective of this panel is to determine whether there is a reliable and operationally feasible method for estimating this distribution. Having worked through the complex procedures and sets of steps for administering the NSLP and SBP programs under traditional and special provisions for reimbursement, one can see the potential advantages of an approach using existing data that could further reduce the burden on parents and schools and at the same time enable the school meals pro - grams to serve additional students. The remaining chapters describe our technical approach for developing and evaluating methods for estimating the claiming percentages in the Provision 4 reimbursement equation. The next chapter discusses the ACS and other sources of data relevant to our study. 16Although the claiming percentages are called “percentages,” they would be expressed as proportions for the purposes of calculating reimbursements using the formula.