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September 25, 2015 - Since 1990, real spending for child nutrition programs more than doubled—to $20 billion in 2014. CBO expects that increases in food prices and demographic changes will cause spending to rise further in the future.

Several federal programs support children’s nutritional needs. In 2014, the federal government spent about $20 billion to reimburse schools, child care centers, and after-school programs for children’s meals. Those programs benefit mainly school-age children from low-income households. Other nutrition programs provide benefits directly to such households: the Supplemental Nutrition Assistance Program (SNAP; formerly the Food Stamp program) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).

The largest of the five school- and center-based programs, the National School Lunch Program (NSLP), fed about 30 million children each school day in 2014 and cost $12.7 billion. The federal government spent another $3.7 billion in 2014 to feed about 14 million children through the School Breakfast Program (SBP). The government also spent $3.6 billion to provide nutritional assistance in locations outside schools and during the summer, as well as to augment children’s diets with milk. This report focuses on the school lunch and breakfast programs, which account for more than 80 percent of all spending for child nutrition programs.

Population growth, higher reimbursement rates, policy changes, and other factors more than doubled spending in real terms (meaning that values are adjusted for inflation) on child nutrition programs from 1990 to 2014. Continued increases in food prices and demographic changes are expected to contribute to further growth in spending on child nutrition programs. Under current law, the Congressional Budget Office projects, spending would rise to about $31 billion in nominal dollars by 2025. Adjusted for expected inflation, that value represents an increase of 26 percent over 2014 spending.

How Do the School Meal Programs Operate?

The federal government reimburses participating schools for at least part of the cost of each meal that they serve to students that meets nutrition standards. Household income typically determines how much the student is expected to pay for a meal and the amount of the government’s reimbursement to the school:

• Meals are free for students from households with income of up to 130 percent of the federal poverty guidelines (commonly known as the federal poverty level, or FPL) or who meet criteria for categorical eligibility (that is, they automatically qualified by participating in certain other federal or state programs); those meals are reimbursed by the federal government at the highest rate.
• Students from households with income between 130 percent and 185 percent of the FPL pay a small amount for their meals (referred to as reduced-price meals), which the government reimburses at a lower rate.
• Students from households with income greater than 185 percent of the FPL pay a price for their meals that is set by the school; those meals (referred to as paid meals) are reimbursed at a still lower rate.

Schools that do not participate in the child nutrition programs do not receive federal reimbursements for any of the meals they serve, regardless of the household income of the child who receives the meal.

Beyond federal reimbursements for meals, participating schools receive commodity food products purchased by the Department of Agriculture (USDA) and may receive additional reimbursements if the share of students eligible for free and reduced-price meals exceeds certain thresholds. Although all meals served through child nutrition programs must meet nutritional standards, schools may receive additional reimbursements when state authorities certify such compliance.

What Are Some Characteristics of NSLP and SBP Participants?

Compared with children ages 5 to 18 overall, children in the school lunch and breakfast programs have different socioeconomic profiles. For example, a larger share of participants in those programs comes from lower-income households. Breakfast participation more closely reflects the child poverty rate in a state than does lunch participation. Participants in both programs are more likely to come from households headed by a single woman and identify themselves as non-Hispanic black or Hispanic. At some point in the year, nearly half of low-income households with children receiving a free or reduced-price lunch experienced food insecurity (difficulty providing enough food for all members of the household owing to a lack of resources). That proportion was more than twice as high as the overall proportion for households with children.

How Do Child Nutrition Programs Affect Participants?

The effects of participating in NSLP, SBP, or other child nutrition programs on children’s nutritional intake, health outcomes, and educational achievement are unclear. Researchers studying that question have often reached conflicting or inconclusive results, in large part because it is often difficult to isolate the effects of the program from those of other factors.

What Has Caused Changes in Spending for Child Nutrition Programs?

Since 1990, federal spending for child nutrition programs has more than doubled in real terms. In 2014, schools and child care centers served 25 percent more lunches than in 1990 and more than tripled the number of breakfasts they served that year, providing many more meals at the free and reduced-price level. Demographic and economic factors; policy choices; and state, local, and household decisions contributed to growth in the number of meals served. Federal reimbursements per meal—which adjust automatically each year for changes in the price of food—also increased. And since October 2012, schools whose lunches state officials certify as meeting federal nutritional standards have received a small additional reimbursement.

What Are Some Options to Change Child Nutrition Programs?

To explore how changing child nutrition programs would affect federal spending, CBO assessed four options:

• Option 1. Eliminate the reimbursement for paid meals.
• Option 2. Replace child nutrition programs with a smaller block grant.
• Option 3. Increase the income limit for free meals.
• Option 4. Increase reimbursement rates by 10 cents.

By eliminating all reimbursements for meals served to students from households making more than 185 percent of the FPL, Option 1 would target federal reimbursements to children from households with the lowest incomes, reducing federal spending by $11 billion from 2016 through 2025. One consequence, however, is that schools might raise prices for students from higher-income families. Some students might stop purchasing meals, causing schools to lose revenue and possibly leave the programs. If schools left, federal reimbursements for meals served to lower-income children also would cease.

For Option 2, CBO has estimated the savings from two alternatives for converting child nutrition programs to block grants. One alternative would peg the initial amount of the block grant to the 2007 budget authority for child nutrition programs and, over time, allow the grant to increase with a general measure of inflation. That alternative would reduce projected federal spending by about a third, $81 billion, from 2016 to 2025. Another alternative would initially base the grant on 2014 budget authority and allow the amount of the grant to increase with growth in food prices; that alternative would reduce federal spending by $21 billion (or about 8 percent) over the same period. These options would result in less federal spending because they would not adjust for changes in the number of meals served. Other base amounts of the grant or changes in growth rates would reduce federal spending by different amounts.

A block grant would make federal spending more predictable and would allow states more freedom to design programs suited to local needs. However, block grants that are smaller than the funding that current legislation would provide would probably eliminate access to nutrition programs for some children and reduce it for others. Such grants would also leave the programs unable to respond automatically to economic downturns.

Option 3, increasing the income limit for free meals, would effectively replace reduced-price meals with free meals; that option would increase federal spending by $6 billion through 2025, CBO estimates. That change would increase revenues for schools and reduce the administrative burden of collecting fees for reduced-price lunches. However, this option could expand federal benefits to some families that can already afford what they pay for meals.

Option 4, increasing the reimbursement rate for meals by 10 cents, would increase federal spending by $10 billion through 2025, CBO estimates. Those funds would allow schools to better meet the costs of providing meals to students and could help schools comply with updated nutrition standards but also would benefit schools that meet the standards without additional funding.
Source: CBO