Eliminate Subsidies for Certain Meals in the National School Lunch, School Breakfast, and Child and Adult Care Food Programs

Background

The National School Lunch Program, the School Breakfast Program, and the Child and Adult Care Food Program provide funds that enable public schools, nonprofit private schools, child and adult care centers, and residential child care institutions to offer subsidized meals and snacks to participants. In the 2018-2019 school year, federal subsidies are generally 61 cents for each lunch, 31 cents for each breakfast, and 8 cents for each snack for participants in households with income above 185 percent of the federal poverty guidelines (commonly known as the federal poverty level, or FPL). The programs provide larger subsidies for meals served to participants from households with income at or below 185 percent of the FPL and above 130 percent of the FPL, and still larger subsidies to participants from households with income at or below 130 percent of the FPL. As a result of the subsidies, participants from households with income at or below 130 percent of the FPL pay nothing for their meals.

Under current law, federal subsidies for meals served to participants from households with income greater than 185 percent of the FPL can include base cash subsidies; certain commodities; and, for those schools participating in the school lunch program that comply with federal nutrition guidelines, an additional cash subsidy. In the 2018-2019 school year, the base cash subsidies for meals served to participants from households with income greater than 185 percent of the FPL are 31 cents per lunch and 31 cents per breakfast; for after-school snacks provided to such participants, the amount is 8 cents. All participating schools and centers also receive commodities—food from the Department of Agriculture, such as fruit and meat—with a value of 23.5 cents per lunch. Schools that offer meals that are certified by state authorities as complying with federal nutrition guidelines receive an additional cash subsidy of 6 cents per lunch in the 2018-2019 school year. (Additional subsidies are available for schools and centers in Alaska and Hawaii, schools in Puerto Rico, and participating schools that serve a certain number of meals to students from households with income at or below 185 percent of the FPL.)

Option

Beginning in July 2019, this option would eliminate the subsidies for meals and snacks served through the National School Lunch Program, the School Breakfast Program, and a portion of the Child and Adult Care Food Program to participants from households with income greater than 185 percent of the FPL. The Child and Adult Care Food Program provides funds for meals and snacks served in child and adult care centers as well as in day care homes. Reimbursement rates for meals served through participating child and adult care centers are equal to the reimbursement rates for meals served through the National School Lunch Program and the School Breakfast Program. Because reimbursement rates for meals served in day care homes are set differently, this option does not affect day care homes.

Effects on the Budget

The Congressional Budget Office estimates that the option would reduce federal spending by $10.7 billion through 2028. Reductions in the number of meals served under the option account for most of savings. In 2028, CBO's projection of $1.4 billion in savings that year reflects:

• About 1.4 billion fewer lunches and snacks through the school lunch program, at an average subsidy of about 63 cents;
• About 450 million fewer breakfasts served through the School Breakfast Program, at an average subsidy of about 43 cents;
• About 425 million fewer meals and snacks served in the child and adult food program, at an average subsidy of about 30 cents; and
• Additional savings of about $200 million from reduced spending on commodities and program administration.

Those estimates are based on historical trends, projected school enrollment, and other factors.

Most of the outlay savings are from the elimination of the subsidy for paid meals in the lunch and breakfast programs, but CBO also estimates that some schools and centers where a small share of meals are served to participants for free or at reduced price levels would drop out of the programs. About 15 percent of the total savings are from the loss of free and reduced price meals and snacks at schools that would exit the programs without the subsidy for meals served to participants from higher-income households.

There are several sources of uncertainty in this estimate, including, for example, CBO's projections under current law of the number of meals and snacks served and the reimbursement rates for those meals and snacks, which partly depend on inflation. Additionally, there is uncertainty about how many schools and centers with low levels of free and reduced price meal reimbursements would drop out of the programs under the option.

Other Effects

The primary argument for this option is that it would target federal subsidies to those most in need. Because the subsidies for meals served to participants from households with income greater than 185 percent of the FPL are small, the effect of the option on those participants and the members of their households would probably be minimal.

An argument against this option is that schools and centers would probably offset part or all of the loss of the subsidies by charging participants from higher-income households higher prices for meals, and some of those participants might stop buying meals. In addition, schools and centers might leave the programs if they incur meal program costs that exceed the subsidies they receive for meals served to participants from households with income at or below 185 percent of the FPL; about one-third of school food authorities surveyed claimed that expenses exceeded revenues in the previous year (Food and Nutrition Service 2016). Individuals at such institutions who would be eligible for free or reduced-price meals would no longer receive subsidized meals, and the meals served at those institutions would no longer have to meet any other requirements of the programs (including the nutrition guidelines).