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School Lunch Prices Rise

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School Lunch Prices Rise

June 14, 2007 -- As the 2006-2007 school year draws to a close, many school boards nationwide are voting to increase school lunch prices for the coming school year in response to a wide range of factors. While school lunch price increases will not affect students who qualify for and receive free or reduced-price meals, they potentially could affect the 12.4 million students who pay full price for a healthy school lunch through the National School Lunch Program (NSLP) each school day. The 2006-07 national average for a school lunch was $1.80 ($1.66 for elementary schools; $1.85 for middle schools and $1.90 for high schools).

School nutrition programs are expected to be financially self-sufficient, relying on revenue from paid school meals and federal reimbursements from NSLP meals served, instead of the general school district budget. While providing quality, affordable meals to students, school nutrition professionals must balance nutrition requirements, student preferences and financial obligations.

Last month, SNA tracked 21 local newspaper reports on school boards increasing the price of lunch, up from 12 stories in May 2006. Among the reasons identified for the increase in school lunch prices were the rise in food costs in general (particularly milk,) increased fuel costs, higher labor costs and the cost of healthy food items that meet new local and state school nutrition standards.
Lunch Price Trends

The soon-to-be-released School Nutrition Operations Report: The State of School Nutrition 2007, anticipates the increase in school lunch prices. The Report, based on a survey conducted in Spring 2007, found that the top two most-pressing issues faced by school nutrition directors in their districts’ this year were funding and the cost of food/food preparation. The Report also found that school lunch meal prices show consistent rates of increase over time.

According to the Report, one-third of school districts increased full-paid lunch meal prices in the past school year, a small upswing from the number indicating a year-to-year meal charge increase in the 2005 Operations Report survey. Full-paid lunch meal prices increased a median of about 9%, or about five cents, and breakfast prices increased a median of about 15% in those districts that raised meal prices.

Gas Prices Increase
Among the reasons for increases, gas prices are often cited as a major factor, particularly for large school districts that arrange for meal and food delivery from central facilities to many school sites. According to the U.S. Energy Information Administration, part of the U.S. Department of Energy, the price of gas is up 27 cents from the same week in early June 2006, an increase of over 8%.

Food Costs Go Up
Also as of early June, U.S. retail milk prices have increased about 3%, or roughly a dime a gallon, since last year, according to the U.S. Department of Agriculture. Some experts predict additional increases in the coming months of up to 40 more cents per gallon. The price per pound of ground beef has risen 3% since last year. Produce has seen an increase in price, as well. Overall, the price of groceries is up 4% since last year, and experts predict that prices will continue to rise through the end of the year.

According to the latest available information from the Bureau of Labor Statistics’ Consumer Price Index Summary, the food and beverages index rose 0.4% in April 2007. The Bureau notes upturns in the indexes for fruits and vegetables and for cereal and bakery products with the index for fruits and vegetables rising 0.4% in April. The indexes for fresh vegetables and for processed fruits and vegetables increased 1.6 and 0.6%, respectively.

Many observers attribute the rising cost of gasoline and increased use of corn for ethanol production as driving the rise in retail food prices. Transportation costs are skyrocketing, as gasoline prices increase due to growing demand and limited production. Record demand for corn is driving up prices of the crop, affecting nearly every item in the grocery store, as corn is used in hundreds of processed food products, plus as feed for cattle, cows and hens. With a growing emphasis on alternative energy sources, many farmers are now raising corn for ethanol production; some are turning fields formerly used to grow soy, wheat and other crops into cornfields. All of these issues are combining to increase the cost of food throughout the country.

Healthful Food Costs More
A late spring segment by a Syracuse, N.Y. television station highlighted the fiscal challenges faced by school nutrition programs. The Central Square school district foodservice director noted that corn prices and transportation costs are not the only factors affecting school meals costs. Calls for more fresh fruits, vegetables, and whole grains in school meals are also driving food costs higher for districts.

In early May, a web-based survey of school nutrition directors asked about challenges associated with wellness policy implementation. The top two identified by SNA members were the price of products that meet nutrition standards (62%) and finding products that meet standards (50%). In 30 states, local wellness policies also must reflect required state nutrition standards. Anecdotally, small- and medium-sized school districts are having the most difficult time finding food, snack and beverage items that meet local and state nutrition standards.

The Rising Cost of Labor
Labor costs, which amount to about 40% of the expenses (on average) for school nutrition programs, are also contributing to increased costs. The 2006 School Nutrition Compensation and Benefits Report found a 5.6% increase in the salaries of full-time school foodservice managers between 2001 and 2006. The salaries for full-time foodservice assistants (10.1%), dishwashers (12.6%) and cashiers (9.9%) also increased. Benefits, particularly healthcare benefits have become both more common and more expensive for employers such as school food and nutrition departments. The 2006 Report found that 96.5% of school districts offer health insurance to full-time employees while 28% offer it to part-time employees. This is consistent with the 2001 and 2004 surveys as well. According to the National Coalition on Health Care, in 2006 employer health insurance premiums increased by 7.7% or twice the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $11,500. The annual premium for single coverage averaged over $4,200.

A 2003 report by the U.S. Government Accountability Office (GAO) covered the topic as well. The report, School Meal Programs: Revenue and Expense Information from Selected States, concluded that labor and food purchases accounted for most of the expenses of operating school nutrition programs, with nearly equal shares of annual expenditures. From school year 1996-1997 to the 2000-2001 school year, labor expenses slightly increased as a portion of total expenses, while food expenses slightly decreased. Total school foodservice expenses reported by the six states studied by the GAO had increased from about $3.4 billion to about $4.1 billion between school years 1996-1997 and 2000-2001. Labor and food purchases accounted for significant and nearly equal portions of the total expenses during the period. Labor expenses included the cost of salary and benefits of foodservice staff.

Conclusion
School nutrition programs nationally continue to be challenged by the increasing costs of operating their programs. These challenges exist in an environment that routinely expects them to break even financially, or even contribute funds back to the general school district budget, while also proving high-quality, nutritious meals at a very low price to parents and students. Without additional financial support from the federal, state or local level, school nutrition programs will need to continue to raise school lunch prices in order to operate in the black.


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