The 2022-23 Budget: School Nutrition

The 2022-23 Budget: School Nutrition FEBRUARY 2022 Summary. This post provides background on have access to free, nutritious school meals. For various school nutrition programs and requirements, instance, one option allows low-income schools describes the Governor’s school nutrition proposals, to identify students eligible for free meals through and offers associated assessments and their participation in other income-based state and recommendations to the Legislature. federal programs (such as Medi-Cal, the state’s health care program for low-income residents), Background rather than collecting a meal application directly State and Federal Government Both from each student every year. In California, at Administer Nutrition Programs. California schools least 4,249 schools (out of about 10,000 schools that participate in either federal or state school statewide) participated in one of the federal universal nutrition programs provide eligible children free meal options in 2021-22. or reduced-price meals (FRPM) while they attend Federal Government Provided Additional school. Eligibility is based on whether a child’s School Meal Flexibilities During Pandemic. household meets certain income requirements. In response to the COVID-19 pandemic, the federal For example, to qualify for a free lunch, students government issued (then subsequently extended) must be from households that have incomes at waivers expanding the flexibility of schools to or below 130 percent of the federal poverty level provide meals safely. The waivers allow schools to ($28,550 for a family of three in 2021-22). Students provide meals free of charge to all students—not who do not meet income requirements typically pay solely low-income students—until June 30, 2022. full price for school meals. The federal and state This change was intended to streamline meal nutrition programs then reimburse schools based service and reduce potential COVID-19 exposure on the number of meals they serve. For example, by eliminating the need to collect meal payments in 2019-20, school districts that participated from students. The waivers also increase the federal in the federal National School Lunch Program reimbursement rate schools will receive for these generally received $3.50 per free lunch, $3.10 per meals for 2021-22 from around $3.75 to $4.32 per reduced-price lunch, and 41 cents per paid lunch. lunch to account for higher operation costs (Some schools, representing a small share of public during the pandemic (such as addressing staffing school students, do not participate in the National shortages and higher food costs related to inflation). School Lunch Program.) The state program provided The 2021-22 state budget included $54 million an additional 24 cents per free or reduced-price ongoing to provide the state rate for additional breakfast or lunch. Both reimbursement rates are meals schools anticipate serving under the federal adjusted annually for inflation. meal waivers. Some Schools Provide Free School Lunches Starting in 2022-23, All California Schools to All Students Under Federal Program. Under Will Be Required to Provide Universal Meals. the National School Lunch Program, schools with Trailer legislation as part of the 2021-22 budget significant shares of FRPM-eligible students have package requires that, beginning in 2022-23, all several options to serve all students free meals, also schools provide one free breakfast and one free known as universal meals. The federal universal lunch per school day to any student requesting a meal options aim to reduce administrative burden; meal. To increase federal reimbursements, schools streamline meal service; and ensure all students that have at least 40 percent of students eligible 2022-23 Budget Series 1 for free meals (about 7,000 schools statewide) are a school district that cooks food at each school required to participate in a federal universal meals site has a different model and associated costs option. The state will cover the cost of a meal compared to a district that processes food in a up to the combined state and free federal rate, central kitchen before distributing to school sites. resulting in all meals generating the same total Regardless of the exact structure of the nutrition reimbursement for schools. For example, based program, the Fiscal Crisis and Management on the 2021-22 rates, a school would receive a Assistance Team—a team of fiscal experts who total reimbursement of $3.74 for a lunch served to conduct in-depth studies of district budgets and a student eligible for free lunch—with $3.50 from recommend specific steps for improving their federal funds and 24 cents from state funds. fiscal health—recommends labor costs not exceed The school would also receive $3.74 for a lunch 45 percent of nutrition revenues, with food and served to a student who is not eligible for FRPM— supplies also not to exceed a similar share. Districts with 41 cents from federal funds and $3.33 from also have the option to use their local general state funds. purpose funding to cover costs in the nutrition Incorporation of Fresh Foods Into School program that exceed school nutrition revenue. Meals Differs Across Schools. Schools Districts Use Various Funding Sources for participating in either the state or federal nutrition Kitchen Equipment and Facilities Upgrades. program must serve meals that meet certain According to the Center for Cities + Schools report, nutritional standards, such as offering daily servings districts most commonly use local general purpose of fruits and vegetables and limiting the amount funding for kitchen equipment upgrades, such as sodium and fats in meals. The methods districts purchasing new refrigerators, ovens, or stoves. use to prepare school meals, however, largely vary. (The study included meal reimbursements from the Some schools prepare a large portion of their meals federal nutrition programs as part of local general using fresh, unprocessed, raw ingredients either on purpose funding, even though federal nutrition the school site or nearby, also known as “scratch” revenue used on equipment must exclusively cooking. Other schools rely on the convenience of support food service.) Federal grants, local processed foods or third-party vendors to supply school bond funds, and recent federal COVID-19 fully prepared meals, which are then distributed to relief funding can also cover kitchen equipment and warmed up at school sites. Schools can also upgrades. For more structural upgrades to rely on a mix of both fresh and readily prepared kitchen facilities, such as kitchen renovations and ingredients, also called “speed scratch” cooking. expansions, districts are more likely to use local A 2020 survey of 200 California school districts school bonds, local general purpose funding, and conducted by the Center for Cities + Schools at the state school bond funds. University of California Berkeley found that more Federal Law Requires School Food Service than half of responding districts (53 percent) fell into Workers Meet Annual Training Requirements. this latter category, while 31 percent reported high Food service workers are required to complete levels of scratch cooking, and 16 percent reporting six hours of training per year if they are employed little or no scratch cooking. full time and four hours if they are employed part Typical Practice Is for School Nutrition time. School districts typically provide training to Revenue to Cover Operational Costs of the meet this requirement and cover the annual costs Program. A school district’s primary revenue within their nutrition program (rather than having sources for school nutrition programs are federal employees find training on their own). Districts must and state reimbursements, as well as payments offer training that is job related, but have discretion received from students who purchase meals. The on the exact topics and format of the training. For largest expenses for a food service program include example, topics can include food safety standards labor, food, and kitchen equipment. School district and meal counting procedures. The district could costs can vary based on staff compensation, provide this training in person or have its employees quality of food purchased, and how food is watch a prerecorded webinar. prepared and served to students. For example, 2022-23 Budget Series 2 2021-22 Budget Provided $150 Million Governor’s Proposals for Kitchen Infrastructure Upgrades and Provides $596 Million Augmentation to Fund Staff Training. The 2021-22 budget provided Universal Meals Implementation. The funding $150 million one-time Proposition 98 to local would cover the increased state share to reimburse education agencies (LEAs)—school districts, the cost of reduce-priced and paid meals up to charter schools, and county offices of education— the combined state and federal reimbursement for for kitchen upgrades ($120 million) and training food free meals. Including the $54 million provided in service staff ($30 million) to help implement the the 2021-22 budget, the state would provide a total new state universal meals requirement. Only LEAs augmentation of $650 million to implement the new participating in the federal school lunch or breakfast state universal meals requirement. program were eligible for funding. For the kitchen Funds Second Round of Kitchen upgrades, every LEA was to receive a base grant Infrastructure and Training Grants. of $25,000, with the remaining funds distributed The Governor’s budget provides $450 million to LEAs where at least half of the students are one-time Proposition 98 for additional school FRPM-eligible, based on an LEA’s population of kitchen infrastructure grants available through such students. The training funds were distributed June 30, 2025. LEAs would be required to report proportionally based on the number of classified how this funding was used to improve or expand employees. In order to receive funding, LEAs were their nutrition program by June 30, 2025. The required to indicate to the California Department funding would be allocated in three ways: of Education (CDE) their interest in receiving the funds. The department collected this information • Base Grant. A $100,000 base grant for on January 24, 2022. Eighty percent of eligible every LEA. Funds could be used for kitchen LEAs (940 out of 1176 LEAs) requested kitchen infrastructure upgrades and staff training. infrastructure and/or training funds. For kitchen • Per-FRPM Student Grant. After accounting infrastructure funding, most LEAs requested for base grants, half of the remaining funding funding to purchase cooking equipment and would be allocated to LEAs where at least make associated facility upgrades (91 percent), 30 percent of students are FRPM-eligible. followed by service equipment (88 percent)—such Funds would be distributed proportionally as mobile carts—and refrigeration and storage based on an LEA’s population of students (88 percent). By June 30, 2023, CDE is required to that qualify for FRPM. As with the base collect expenditure reports and narrative responses grant, these funds could be used for kitchen explaining how these funds were used to improve infrastructure upgrades and staff training. the quality of school meals or increase school • Scratch Cooking Grant. The remaining meals participation from each participating LEA. funding would be allocated to LEAs based on State Provides Ongoing Funding for School the number of meals served in October 2022 Breakfast and Summer Meal Program Start-Up and could be used for facility improvements and Expansion Grants. In 2017-18, the state and equipment upgrades to increase scratch began providing annual funding for schools to and speed scratch cooking. To receive this establish or expand nutrition programs to offer funding, LEAs would have to attest that, breakfast or summer meals. Eligible school sites beginning in 2023-24, at least 40 percent of must have at least 20 percent of students eligible meals served will be prepared using scratch for FRPM. CDE administers these competitive and speed scratch cooking methods. grants and awards grants of up to $15,000 per Kitchen Infrastructure Spending Exempt school to cover associated costs for kitchen From State Appropriations Limit (SAL). The equipment. The 2021-22 budget included $1 million administration deems the $450 million for kitchen for school breakfast and summer meal start-up and upgrades to be excluded from the SAL. (The expansion grants. California Constitution imposes a limit on the amount of revenue the state can appropriate each 2022-23 Budget Series 3 year. The state can exclude certain capital outlay the needs associated with universal meals. Trailer appropriations from the SAL calculation. In our legislation for the first round of funding requires report, The State Appropriations Limit, we cover LEAs to report on the outcomes of those funds SAL issues in more detail.) by June 30, 2023. As such, the state cannot yet Includes $3 Million One Time for Breakfast measure the effect of previous funding on the and Summer Meal Start-Up and Expansion quality of school meals, LEAs’ capacity to serve Grants. The Governor’s budget also includes more meals, or remaining demand for upgrades— additional funding for school breakfast and making it difficult for the Legislature to determine summer meal start-up and expansion grants. the extent to which additional funding for kitchen This proposal is intended to support universal infrastructure is needed. meals implementation. Proposal Does Not Target Districts Likely to Significantly Expand Under Universal Assessment Meals. The administration intends all of the Ongoing Funding Augmentation Is Aligned kitchen infrastructure and training funding to With Legislative Intent. The proposed $596 million increase capacity to meet the state universal augmentation is consistent with recent legislative meals requirements. Neither of the proposed actions to implement universal meals starting in formulas for allocating the funding beyond the 2022-23. Since paid meals receive the lowest base grants, however, would target funding to federal reimbursement rates, much of the districts needing to either establish or significantly augmentation would likely go towards providing expand their school nutrition programs to meet the higher state subsidies for previously paid meals. universal meals requirement. Rather, one of the New State Universal Meals Requirement proposed formulas excludes LEAs where less than Will Impact Districts Differently. Implementing 30 percent of students are FRPM-eligible—a group universal meals will result in a statewide increase in that is among the most likely to need significant the number of daily meals served. The magnitude increased capacity to meet the new requirements. of this change, however, will vary by district. Some Furthermore, since the formula would allocate districts—especially those not currently offering funding proportional to FRPM-eligible students, breakfast and/or lunch and those with mostly more funding would disproportionately go to higher-income students paying full price for meals— districts most likely to already operate high-capacity will likely see student participation increase, as all school nutrition programs. We think distributing students can now receive two school meals for free. funding using a measure of anticipated capacity These schools might need to increase capacity needs could better target funding to districts most and modify their nutrition program. For example, affected by the universal meals requirement. districts serving significantly more meals will have Additional Staff Time and Training Likely to manage higher volumes of food at any given time Also Required for Universal Meals. In addition and could benefit from additional food storage and to kitchen infrastructure upgrades, universal meals kitchen equipment upgrades. Universal meals will will require additional staff time and training. For have less impact on districts that already serve universal meals, increasing the number of daily breakfast and lunch to most of their students for meals served could require kitchen staff to work free or reduced price. longer hours or the district to hire additional kitchen Remaining Need for Infrastructure Upgrades staff, food truck delivery drivers, or other workers. Is Unclear. Although implementing universal meals Additional Funding for Scratch Cooking will require some upgrades, the state currently does Could Be Premature. Although encouraging more not have a clear sense of the total cost of kitchen scratch cooking likely has merit, school nutrition infrastructure upgrades associated with universal programs have to manage various challenges in the meals. The 2021-22 budget already provided near term, including the implementation of universal $150 million for kitchen infrastructure upgrades and meals, addressing staffing shortages resulting staff training and could have addressed many of from the pandemic, and managing increased 2022-23 Budget Series 4 costs for food and equipment due to inflation. encouraging more scratch cooking. The Legislature Furthermore, the state lacks comprehensive data could revisit both universal meals implementation on the kitchen infrastructure upgrades and staffing and scratch cooking and provide additional costs associated with scratch cooking. For these funding in future years, once more information reasons, we believe additional funding for scratch about demand and the use of 2021-22 grants cooking to be premature at this time, but could be becomes available. revisited in future years. Consider Modifying Formula to Target Districts Most Impacted by Universal Meals. Recommendations Regarding the allocation formula, the Legislature Approve Funding Augmentation to Implement could also consider modifying the formula to Universal Meals. We recommend the Legislature provide more funding to LEAs that would need approve the proposed funding augmentation to to increase capacity most under universal meals. increase the state share for reduce-priced and This would likely provide more funding to districts paid meals as the state implements the universal not currently participating in the federal nutrition meals requirement starting in 2022-23. The exact programs or with a lower share of students eligible amount of funding likely will need to be updated as for FRPM. Given that the Legislature committed to part of the May Revision, when the state will have implementing universal meals, targeting funding to more data on meals served during the 2021-22 LEAs most impacted by these new requirements school year. could ensure smoother implementation. One way Reduce Proposed Kitchen Infrastructure to allocate funding is based on projections of how Funding to $150 Million, Focus on Universal many more meals an LEA will need to serve under Meals Implementation. Given the recent funding universal meals compared to a prior baseline level provided and the uncertainty regarding overall of meals served. demand, we recommend the Legislature provide Legislature Could Consider Other $150 million (one-third of the amount proposed by SAL-Excludable Expenditures. If the Legislature the Governor) for kitchen infrastructure upgrades were to reject or reduce the size of this proposal, and training. This would match the amount provided it would likely need to replace the associated in 2021-22. Similar to the first round of funding, spending with other SAL-excludable proposals we recommend setting the base grant amount to continue meeting its overall SAL requirement. at $25,000 per LEA, rather than the proposed The Legislature could fund a variety of other $100,000 per LEA. The remaining funding could be options, such as funding for districts to address distributed by formula to all LEAs. As we discuss in school facility needs related to climate resiliency or more detail below, we also recommend the funding deferred maintenance projects. be targeted to implementing universal meals, not 2022-23 Budget Series 5 2022-23 Budget Series 6 2022-23 Budget Series 7 LAO PUBLICATIONS This post was prepared by Amy Li, and reviewed by Edgar Cabral and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2022-23 Budget Series 8