School kids feel the bite of high food prices

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NEW YORK (CNNMoney.com) -- Rising food prices are making it harder for schools to cook up ways to give kids the nutrition they need.

Right now, they're taking shortcuts and shuffling ingredients to make up the difference, but that's only a short-term solution with long-term consequences on the horizon.

"I've been in school service for 27 years and this is the worst it's ever been," said Sara Gasiorowski, food service director for Wayne Township Schools in Indianapolis. "I have never seen food prices jump up so far."

Gasiorowski said kids will still get nutritious meals, but her kitchen staff could suffer as a result. Three days have already been shaved off the 191-day work year because of food inflation, she said, and if it gets any worse, lay-offs are "a possibility."

Food-price pain is especially sharp in California, which has some of the nation's strictest nutrition rules. "With all the food requirements we have [here], it's doubly difficult this year. There isn't enough money to go around," said Lynnelle Grumbles, food service director at Visalia Unified School District in central California.

Food prices nationwide have risen 4.5% between March 2007 and March 2008, according to the Bureau of Labor Statistics' Consumer Price Index, with flour and eggs rising even more dramatically than milk. Grumbles said milk prices in her district are up 22% from last year, which means an increase of 3.5 cents for each of the federally required 16,000 half-pints she provides every day.

"For every penny on a carton of milk, it costs me $30,000 a year," she said. "That's $105,000 extra on my food bill."

Flour prices have roughly doubled over the last year, according to Grumbles, to $19 per 50-pound bag. To make up for the difference, she substitutes canned peaches for fresh apples "to save a couple pennies" per meal, or she uses ground beef in place of chicken.

"The parents expect more fresh vegetables, but we're having to make a choice not to," Grumbles said. The only other solutions would be to lay off workers, charge parents more per plate, or convince Congress to increase its annual reimbursement rate, she said.

"If the general public expects school programs to provide quality food for their kids, then the reimbursement rates need to increase," she said. "The increase over the next two years needs to double, in order to survive."

Federal reimbursement programs cover all or part of school districts' lunch tabs. Congress lifts reimbursement rates every year, but Gasiorowski said it hasn't been enough: "We need to be looking at an increase of 12% to 15%, instead of our usual annual increase of 2 or 3%."

Schools have to meet weekly requirements for protein, starch, calories and various food groups, or else they can lose their federal reimbursement, said Erik Peterson, spokesman for the School Nutrition Association. But he said Congress' annual rate increases need to keep up with food price inflation, or "the school programs would have to get into the red, and then it's the local school district that has to bail them out."

The most aggressive federal reimbursement program is the free lunch that schools provide to kids whose families earn less than $27,000 per year (the government-set poverty level for a family of four in most states is about $20,000 per year).

For the free lunch, the U.S. government reimburses schools $2.47 per meal. For kids whose families bring in between $27,000 and $38,000 per year, the government subsidizes $2.07 per meal. For kids in families that make more than $38,000 per year, the government subsidizes at least 23 cents per meal.

"Schools are losing money on every meal served," said Peterson, of the School Nutrition Association, noting that the average nationwide cost of a school lunch one year ago ranged from $2.70 to $3.10, while schools charged an average of $1.85.

To make up for the increase, Peterson said schools are cutting corners, replacing baby carrots "which the kids love" with chopped carrots, or swapping beefsteak tomatoes with cheaper grape tomatoes, and mixing fresh vegetables with frozen.

"They're looking at these different things to see where to save a few pennies here and there, because it really does come down to pennies," he said. "You can be as creative as you can, but at the end of the day we're going to need more money."

The federal government provides schools with commodities as well. Food from the U.S. Department of Agriculture accounts for 15% to 20% of the nutrition in the nation's school lunches. But school food service directors still say they're struggling, and the biggest challenge is dealing with the price of milk. The school lunch staple has seen a nationwide price increase of 13% between March 2007 and March 2008. The cost of flour, another staple, has jumped 14%.

Jean Daniel, a USDA spokeswoman, said reimbursement rates have increased incrementally over the years to reflect inflation. She said the $2.47 free-meal reimbursement rate for the current school year rose from $2.10 during 2003-2004. The partial $2.07 and 23-cent reimbursement rates climbed respectively from $1.74 and 20 cents four years ago.

"The reimbursement levels have kept pace with inflation over time," said Daniel.

"The spikes that we've seen over the last five, six or seven months will certainly be taken into account."

But Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, which helps set the reimbursement rates, believes adjustments have not been sufficient, according to comments he made at a committee meeting in March.

"It is becoming more clear...that the declining federal adjustment in school nutrition programs has made it harder and harder for schools to provide healthy and nutritious meals that children want to eat," he said.

Lawmakers will soon get a chance to address the issue head on. In July the House Education and Labor Committee and the Senate Agriculture, Nutrition and Forestry Committee meet to set new reimbursement rates for the coming school year.