Inadequate Public Funding and the Sale of Competitive Foods as a Revenue Source

This is a guest blog-post by Professor Timothy D. Lytton

First Lady Michelle Obama’s recently launched Let’s Move campaign to reduce childhood obesity has put a spotlight on reforming school food.

The primary reason for the abundance of unhealthy foods in schools is inadequate public funding of school meals and schools in general. Unfortunately, the sale of unhealthy foods, popular among students, is an essential source of revenue for many schools.

Today, most schools are dominated by foods that are high in sugar, fat, and salt. These items—pizza, burgers, French fries, cakes, snack foods, soda, and candy—are sold in cafeterias, vending machines, and school stores. In addition, students sell these foods to raise funds for extra-curricular activities, parents provide them for in-class birthday parties, and teachers give them out as rewards.

Unhealthy Foods in the Cafeteria

School food services sell unhealthy kids’ favorites as a la carte items in the cafeteria to make up for inadequate school meal subsidies. Additionally, they have incorporated them into the subsidized meals themselves in order to avoid losing student participation in the meal program. (The Federal funding is paid per participating child).

Here’s how it works:

The National School Lunch Program (NSLP) requires participating schools to provide free and reduced price lunches to all income-eligible students. The NSLP then reimburses schools for every free and reduced price lunch served by the school. In addition to these reimbursements, USDA provides schools an allocation of surplus agricultural commodities, and local school food authorities can make agreements with food companies to either process the commodities into ready-to-serve foods such as pizza or French fries, or exchange the commodities for foods that meet USDA nutrition standards. Meal programs also earn revenues from the purchase of reduced and full price meals.

Federal reimbursements, the savings from surplus commodities, and revenues from reduced and full price meals do not generally cover the operating costs of most school food service programs.  While some states provide additional subsidies, they are inadequate to make up the shortfall.  And many local districts provide no funding at all, expecting food services to be financially independent.

Schools attempt to make up this shortfall by selling food outside of the NSLP on an a la carte basis.  Foods sold to students in school outside of federally-subsidized meal programs are known as “competitive foods.”  Competitive foods range from more nutritious foods such as fruit, salad, and milk to less nutritious foods such as French fries, soda, and candy.  They may be sold by the food service program as a la carte items, by the school administration in vending machines and school stores, or by student groups in fundraisers.

Competitive foods are sold in most schools. A 2005 survey conducted for the USDA found that competitive foods were sold in cafeterias as a la carte items in 75 percent of elementary schools and over 90 percent of middle and high schools and in vending machines in 27 percent of elementary schools, 87 percent of middle and junior high schools, and 98 percent of high schools.[i]

Competitive foods are a source of substantial revenue for many schools. A 2005 United States Government Accountability Office (GAO) report found that many schools generated substantial revenues from the sale of competitive foods.  The GAO estimated that in 2003-2004, thirty percent of all high schools generated more than $125,000 per school from the sale of competitive foods, 27 percent of middle schools generated more than $50,000 per school and 32% of elementary schools generated more than $5,000 per school.[ii]

Revenues from a la carte sales of competitive foods help offset food service operating losses due to inadequate public funding.  The GAO reported that in 2003-2004, twenty percent of food service programs that sold a la carte items made over $125,000 per school, and over 65% made over $25,000.[iii]

But here lies the problem – Revenue from a la carte sales does not help to offset operating losses if it merely shifts students from reimbursable lunches to a la carte items.  In order to cover costs, school lunch programs need to keep up their volume of reimbursable lunches while at the same time generating additional revenue from a la carte sales.  This is what leads schools to offer the popular a la carte items—pizza, burgers, French fries, etc.—in reimbursable school lunches.[iv] Thus, there is an incentive to include less healthy food within NSLP meals while selling it also a la carte.

Unhealthy Foods Sold in Vending Machines, School Stores, and Bake Sales

Outside of the cafeteria, school officials, students, and parents sell less healthy foods for which there is high student demand in order to raise money for school programs that lack adequate public funding, such as sports and arts programs.

Competitive foods sold in vending machines, school stores, and fundraisers provide funds for a wide range of school programs and expenses, including athletic equipment, facilities, and uniforms; arts programs such as band and chorus; student field trips; school assemblies; playground equipment; textbooks and school supplies; library supplies; computer equipment; staff development; student rewards and incentives; scholarships; construction of new facilities, and general school overhead such as facilities and grounds maintenance.  Like school food service directors, school officials, teachers, parents, and students seeking to promote educational programs and fill budget gaps also have incentives to sell competitive foods that appeal to students, and this often means more unhealthy food in schools.

There have been efforts to regulate competitive food in schools. The NSLP regulates a subset of competitive foods known as “foods of minimal nutritional value.”  These are foods that provide less than five percent of the recommended daily intake of any of eight specified nutrients per serving, and NSLP regulations prohibit their sale in foodservice areas during mealtimes.[v] Examples of FMNV include soda, chewing gum, and hard candy.  In addition to federal regulation, by 2003, more than half of the states imposed additional restrictions on competitive foods, and an estimated 60 percent of schools had instituted school-level policies on the sale of competitive foods.[vi] In 2004, Congress mandated that by 2006 every school participating in federally subsidized food programs establish a local wellness policy that includes nutrition guidelines for all foods available on school campuses.[vii] There are indicators that most schools have complied with this requirement; however, it is too early to judge how comprehensive these local wellness policies are or what their impact has been.[viii]

In the meantime, schools continue to sell unhealthy foods to make up for inadequate public funding. Recently, a New York City school policy advisory board voted to overturn a nine-month-old ban on most fund-raising food sales in city schools to allow the sale of popular items like Pop-Tarts and Doritos as well as monthly “no-brownies barred Parent-Teacher Association bake sales.”

While money alone will not be enough to improve school food, without it schools will continue rely on the sale of unhealthy foods as an essential source of revenue.

It is time to put the nation’s money where its children’s mouths are.

Timothy D. Lytton is the Albert and Angela Distinguished Professor of Law at Albany Law School where he teaches regulatory law & policy, constitutional law, administrative law, and tort law.
His article “An Educational Approach to School Food: Using Nutrition Standards to Promote Healthy Dietary Habits” is available online by clicking here.

His article “Signs of Change or Clash of Symbols? FDA Regulation of Nutrient Profile Labeling” (forthcoming in Health Matrix, vol. 19, no. 2) is available online by clicking here.

For more information, visit his Albany Law School faculty website.

Suggested further reading: Free for All: Fixing School Food in America by Janet Poppendieck.

[ii] Government Accounting Office, School Meal Programs: Competitive Foods are Widely Available and Generate Substantial Revenues for Schools (August 2005), pp. 27-28.

[iii] Ibid., p. 30.

[iv] Janet Poppendieck, Free for All: Fixing School Food in America (University of California Press, 2010), p. 41.

[v] Ralston et al., p. 31.

[vi] Ibid., p. 31.

[vii] Child Nutrition and WIC Reauthorization Act of 2004, Pub. L. No. 108-265, §204, 118 Stat. 729, 780-81 (2004).

[viii] Jamie Chiriqui, et al., Local Wellness Policies: Assessing School District Strategies for Improving Children’s Health (2009), pp. 10, 81.

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