Lynn Hoggard, Ed.D., RD, LDN, FADA Section Chief, Child Nutrition Services

1. The Perfect Storm…A forecast for the Child Nutrition Program School Nutrition Association Legislative Action Conference March 3, 2008 Lynn Hoggard, Ed.D., RD, LDN, FADA Section Chief, Child Nutrition Services NC Department of Public Instruction

2. What is the “Perfect Storm?” The reference was originally to a fishing boat that was caught in not just one storm, but many weather fronts coming at it from all directions. The boat was sturdy and the crew was experienced, but it could not endure the collision of multiple storms at one time.

3. The Perfect Storm… The meteorologist who predicted the weather patterns would converge in one small area said… “it was an unprecedented set of circumstances. A single weather front alone would have created a dangerous storm, but with all the weather fronts coming together at just the right time, the storm exploded into epic proportions.” Bob Case, Meteorologist NOAA National Weather Service

4. Is the Child Nutrition Program about to be caught in the Perfect Storm? Several factors have begun to circulate in North Carolina that have the potential to converge upon the Child Nutrition Program at one time. If these factors collide with no “rescue” efforts, the program’s future will be in jeopardy.

5. Are conditions favorable for the Perfect Storm? • The Child Nutrition Program was the first “homeland security” program; it was authorized during Post WW ll era with the intent of “safeguarding the well-being and security of the nation.” • The Child Nutrition Program thrived for nearly 4 decades under the guiding principle of “this is the right thing to do for students.”

6. Are conditions favorable for the Perfect Storm? • In the early 80s, the massive Federal budget cut threatened the program. • Nationwide, the program struggled to operate and began to expand the sale of “extra foods and beverages to students” to meet financial obligations; A la Carte meal service began to produce relief from the budget cuts.

7. Are conditions favorable for the Perfect Storm? • A la Carte program has thrived. • Schools made money selling foods and beverages to students. • Students developed an appetite for A la Carte/competitive foods. • Schools developed an appetite for revenues from the sale of A la Carte/competitive foods. • Stigma associated with free or reduced price meals • State and local funding has been re-directed • Indirect costs have been assessed to the program

8. Are conditions favorable for the Perfect Storm? Over the past 20 years, there has been a cultural, nutritional, operational and financial shift in priorities surrounding the Child Nutrition Program. In many NC school districts, the philosophy of “It’s the right thing to do for children” has been replaced with the administration’s priority of “How much revenue can be generated?”

9. Are conditions favorable for the Perfect Storm? Current perception: “The Child Nutrition Program is a Federal Program and is required, by law, to be financially self-supporting. Consequently, there is little “ownership” of the program by state and local decision-makers.”

10. What are the factors that may converge to create the Perfect Storm in the Child Nutrition Program?

11. Factor 1:Operating costs are increasing. • Food Costs • Fuel/Delivery Costs • Service/maintenance • Labor Costs • Employee Benefits • Other costs

12. Factor 2: Indirect costs are increasing. • Indirect costs are being used to help balance the budgets of school districts. • Districts are assessing 100% of the unrestricted rate with little consideration to the effect on the Child Nutrition program. • Indirect costs diminish the free reimbursement rate from $2.47 to $2.23.

13. Factor 2:Indirect costs are increasing. • There is no requirement to provide documentation that the expenses charged as indirect costs are allocable to the Child Nutrition program. • 60% of NC school districts showed a revenue loss in 2006 – 2007 year; only 5% would have shown a loss had all or a portion of indirect cost been waived.

14. Factor 3:Program revenues are decreasing. • Federal Reimbursement, while generous, has not kept pace with cost of living. • Commodities/entitlement dollars remain limited. • A la Carte Sales have plummeted as less healthful foods and beverages have been replaced with more healthful options. • Adult Meal Sales are declining as districts are required to increase adult meal prices to ensure CN funds are used only to benefit students.

15. Factor 3:Program revenues are decreasing. • Catering (where permitted) generates minimal revenues • State Revenue Match Funds were established in the early 80’s and have not been adjusted to reflect current program needs. States are required to make a minimum investment to receive a maximum benefit. • Interest earned on investments • Revenues from the sale of equipment

16. Factor 4:Nutrition Standards will increase costs. • In 2005, NC General Assembly appropriated $25,000 to test the nutrition standards in 124 elementary schools.. • The standards reflected the Dietary Guidelines. • The standards were tested for achievability, affordability and student appeal.

17. Results of Pilots of Nutrition Standards • Initially, the standards were too “ambitious” and unachievable; they were modified weekly. • Products were not yet available to schools. • Food costs were higher, especially whole grains, fresh fruits and vegetables. • Production/labor costs were higher. • Equipment was inadequate to support the standards. • Student participation declined then rebounded. • School districts lost 15 times the amount appropriated for the pilot in less than 5 months.

18. Results of Pilots of Nutrition Standards • General Assembly mandated that the SBE adopt nutrition standards based on pilots. • SBE adopted nutrition standards for elementary schools based on input from Child Nutrition Administrators. • SBE will only consider middle and high school nutrition standards after they are piloted for achievability, affordability and student acceptance. • Provided the basis to request $20 million in recurring state funds.

19. Factor 5 :Sale and availability of competitive foods and beverages The sale of foods and beverages in competition with the school meals programs is estimated to divert $60,000 to $80,000 from the Child Nutrition Program in each high school. The amount of time available for student meals contributes to this problem.

20. Factor 6 :Student meal charges are on the rise. • Student meal charges have typically been ignored by school administrators; the Child Nutrition Program has been expected to “absorb” the cost. • In the past, a considerable amount of student meal charges were the result of issues not related to hunger. • To date, 1 NC school district had 55,000 unpaid meals; the district projects nearly $400,000 in meal charges and unpaid meals by year end.

21. Factor 7 :Eligibility Guidelines have not kept pace with economic conditions. • “Working poor” or economically disadvantaged families” are being disproportionately affected by the current economy, but too many do not qualify for meal benefits. • Has the time come for the eligibility guidelines to reflect a factor related to the economic conditions of the district?

22. Factor 8:Provisions of 2004 Reauthorization were important, but costly. • There was no appropriation for many of the new provisions of the law. • School districts have seen increased costs in: labor, employee training, technology and equipment. • Central offices are no longer adequately staffed to provide program oversight which prevents adequate program monitoring.

23. Factor 9 :Child Nutrition Administrators are being held to an impossible standard. • Child Nutrition Administrators are being caught in the middle in the battle between healthy school foods and healthy school finances. • Many well-qualified Child Nutrition Administrators are choosing other career options. • The pool if qualified Child Nutrition Administrators is very limited.

24. Factor 9:Child Nutrition Administrators are being held to an impossible standard. Example: Average cost to produce a school lunch is $2.80 Average cost to a paying student is $1.75 Free reimbursement falls short by $ 0.33 Reduced reimbursement falls short by $ 0.73 Paid rate falls short by $2.57 Paid rate + meal cost falls short by $ 0.49 Where will the revenues to offset the losses come from?

25. If the Child Nutrition Program continues on its current course… Increased operating costs Increased indirect costs Revenue sources are limited Competitive foods are undermining the program financially Current economy is “competing” with the program Little or no state or local funding or in-kind support Federal reimbursement is not adequate to support program costs Programs are under-staffed Qualified CN Administrators are leaving Is the Perfect Storm in the forecast?

26. If the Child Nutrition Program continues on its current course… The Perfect Storm is forecast for most districts in NC.

27. Unlike the real Perfect Storm, where noperson or thing could control or prevent it, we CAN prevent this Perfect Storm from occurring inNC and throughout the nation.

28. Continue to exercise due diligence to prevent the Perfect Storm. Examine costs (labor, food, other) and make changes in areas that do not compromise the quality of service or participation. Maximize reimbursable meals. Consider cooperative purchasing. Consider meal price increases. Ensure adequate meal times for students. Help school administrators understand the economic cost of competitive foods. Keep school administrators and BOEs informed. Food for Thought…

29. Make a compelling case to your legislators for: 1. Increased federal funding that reflects the actual cost of producing meals. 2. REJECT any discussion of budget cuts. 3. Advocate to eliminate the Reduced Price category. 4. Strengthen the statutory requirement for State and Local governments to support the program directly or indirectly. 5. Leverage State funding support by allowing state-adopted nutrition standards that are consistent with the Dietary Guidelines. Food for Thought…

30. Make a compelling case to your legislators for: 6. USDA to have authority over all foods and beverages available on campus, both content and revenues; add requirement to local wellness policy to address student meal times. 7. Testing any nutrition standards for achievability, affordability and student acceptance before mandating them. 8. Issuing specific guidance to State Agencies and SFAs regarding Indirect Costs. Food for Thought…

31. Perhaps the leadership of SNA would consider: 9. A national education campaign to promote the unique skill set and capabilities of Child Nutrition Administrators. 10. A national campaign, in partnership with the NSBA and NACG/NACC and other collaborating groups to help inform them of the potential crisis in the Child Nutrition Program, and subsequently within the community. Food for Thought…

32. Let’s consider these factors as opportunities rather than obstacles. Let’s remember that we are advocates for children. At the end of the day, we must be able to say we “made the right choices to do the right thing for students”. Let’s rise to the challenge!