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Paid Lunch Equity Requirement--Updated Guidance


Nutrition Services Division Management Bulletin

Purpose: Policy, Beneficial Information, Action Required

To: School Nutrition Program Sponsors

Number: USDA-SNP-16-2012

Attention: Food Service Director, Business Official

Date: October 2012

Subject: Paid Lunch Equity Requirement—Updated Guidance

Reference: U.S. Department of Agriculture (USDA) Interim Rule: School Food Service Account Revenue Amendments Related to the Healthy, Hunger-Free Kids Act of 2010 (June 17, 2011); USDA Policy Memos SP 39-2011 - Revised (October 24, 2011); USDA SP 15-2012 (February 15, 2012); USDA SP 18-2012 (February 24, 2012); and USDA SP 22-2012 (March 19, 2012); USDA SP 28-2012 (April 20, 2012)

This Management Bulletin (MB) provides School Food Authorities (SFA) (Local Educational Agencies participating in School Nutrition Programs [SNP]) updated policy information from the U.S. Department of Agriculture (USDA) regarding new requirements for Paid Lunch Equity (PLE) in Section 205 of the 2010 Healthy, Hunger-Free Kids Act (HHFKA).

Background

In June 2011, the USDA published an Interim Rule pertaining to PLE. The California Department of Education (CDE) Nutrition Services Division (NSD) has been working closely with the USDA to obtain guidance to assist NSD staff and SFAs with implementing this comprehensive new law. To date, the NSD has done the following:

In SY 2011–12, the USDA would accept a “good faith effort” from SFAs to comply with this new provision. However, since the new laws and guidance were so complex and the USDA was providing frequent policy updates, the CDE calculated the WAP for all of California’s SFAs for SY 2011–12, and reported this information to the USDA. In addition, the CDE provided the USDA its first annual report of SFA meal pricing and will continue to do so annually.

Due to the complexity of these new federal requirements, the CDE strongly encourages SFAs to read the USDA’s PLE policy memos and utilize the USDA’s meal pricing calculation tools so they may comply with the new paid lunch pricing requirements. You may access the memos on the USDA’s School Meals Policy Memos Web page at http://www.fns.usda.gov/cnd/Governance/policy.htm. Please search for the term “Paid Lunch Equity.”

School Food Authority Responsibilities

Section 205 of the HHFKA requires SFAs that, on average, charge for paid lunches less than the difference between the federal reimbursements for free and paid lunch ($2.51 for SY 2012–13), to either gradually adjust paid lunch prices upward or provide non-federal funds to cover the difference. This requirement is intended to ensure that SFAs provide sufficient funds to their cafeteria fund/food service account for paid lunches. The USDA has provided a PLE tool to assist SFAs make their price adjustment calculations. The PLE tool can be found on the USDA’s HHFKA Implementation Web page at http://www.fns.usda.gov/cnd/Governance/Legislation/CNR_resources.htm.

State agencies are required to monitor that SFAs are making accurate calculations and adjusting prices appropriately. 

SFAs are responsible for compliance with the new PLE requirements from the HHFKA. The new PLE requirements are listed below:

Note: As stated earlier, the CDE plans to conduct the PLE calculation reporting requirement to assist California’s SFAs. However, it remains the SFA’s responsibility to annually calculate their WAP in accordance with the HHFKA. In addition, the CDE encourages SFAs to calculate the prices before the beginning of each SY to provide their School Boards an opportunity to raise paid meal prices if needed.

The CDE will verify that SFAs are making accurate price calculations and modifications during Administrative Reviews (formerly Coordinated Review Effort) to ensure SFA compliance with this new requirement.

However, on behalf of the SFAs, the CDE will capture the frequently charged prices based on the data reported in the Child Nutrition and Information Payment System (CNIPS).

Since all SFAs must be set for “site level reporting” for their July 2012 reimbursement claim, the CDE will have access to SFA site level data for SY 2012–13 and be able to obtain current meal prices for reporting purposes. Therefore, to ensure CDE and SFA compliance with the law, SFAs must keep their lunch prices current in CNIPS.

Non-Federal Sources

SFAs that choose to contribute non-federal sources to the nonprofit school food service account in lieu of raising paid lunch prices must calculate the appropriate amount to contribute.

To determine the amount of required revenue in lieu of a paid lunch price increase, the SFA must determine the total number of paid reimbursable lunches claimed for the previous school year and multiply by the difference between the SY 2012–13 weighted average paid lunch price requirement and the SY 2011–12 weighted average paid lunch price. The USDA has created a tool to assist SFAs to determine the amount of non-federal sources that must be added to the school food service account. The non-program revenue tool can be found at the USDA’s HHFKA Implementation Web page at http://www.fns.usda.gov/cnd/Governance/Legislation/CNR_resources.htm.

Except as permitted, in SY 2012–13 and beyond, SFAs may only use non-federal sources that are provided to directly support paid lunches to meet the PLE requirement.

Unallowable Non-Federal Funding Sources
Allowable Non-Federal Funding Sources
Allowable Non-Federal Funding Sources for School Year 2011–12 ONLY
Further Information on How to Calculate the Annual Paid Lunch Equity Requirement

Attached to this MB is a How to Calculate the Annual Paid Lunch Equity Requirement document that provides a step by step example for SFAs to calculate their WAP.

The California Department of Education’s Responsibilities

Section 205 of the HHFKA requires State Agencies to ensure compliance with the new PLE requirements by monitoring and reporting pricing information to the USDA. The CDE’s responsibilities include the following:

Paid Lunch Equity Resources

You may view the PLE Interim Rule on the USDA HHFKA Web page at http://www.fns.usda.gov/cnd/governance/legislation/cnr_2010.htm.

USDA PLE Policy Memos are located on the USDA School Meals Policy Memos Web page at http://www.fns.usda.gov/cnd/Governance/policy.htm. Please search for the term “Paid Lunch Equity.”

The USDA’s PLE Calculation Tool (Excel Spreadsheet) is available as an attachment to USDA Policy Memo SP 22-2012 on the USDA School Meals Policy Memos Web page at http://www.fns.usda.gov/cnd/Governance/policy.htm.

Contact Information

If you have any questions regarding this MB or cafeteria fund policy or regulations, please contact the School Nutrition Programs Unit at 800-952-5609, or you can submit your questions to the SNP Cafeteria Fund Team at SNPCafeFundQuestions@cde.ca.gov.

Attachment

How to Calculate the Annual Paid Lunch Equity Requirement (DOC)


How to Calculate the Annual Paid Lunch Equity Requirement

The U.S. Department of Agriculture (USDA) published an Interim Rule regarding new requirements for Paid Lunch Equity (PLE) in Section 205 of the 2010 Healthy, Hunger-Free Kids Act (HHFKA). According to Section 205, all School Food Authorities (SFA) participating in the National School Lunch Program are required to annually calculate their weighted average price (WAP) for paid lunches.

Note:    The CDE will verify SFA WAP calculations during the Administrative Review (previously known as Coordinated Review Effort) to ensure compliance with the new requirement.

              For SFAs to calculate their WAP, they will need the following:

  1. List of sites that served lunches in October in the previous year
  2. Number of paid lunches each site served in October of the previous year
  3. Amount each site charges for paid lunches

Note:    The federal Section 11 free lunch reimbursement rate of $2.51 will be used as an example for the purposes of this Management Bulletin. SFAs charging $2.51 or more are not required to adjust their paid lunch prices in School Year (SY) 2012–13.

To calculate a WAP

  1. Multiply the number of paid lunches served at each site by the amount charged for paid lunches at the corresponding site to calculate each site’s Monthly Revenue (MR).

(# of Paid Lunches Served at Site #1) x (Paid Lunch Price) = MR at Site #1

  1. Add the MR generated from all sites to calculate the Total Monthly Revenue generated district/agency wide.

 (Site #1) MR + (Site #2) MR + (Site #3) MR (and so on) = Total MR

  1. Add together the number of paid lunches served at all sites to calculate the Total Monthly Number of Paid Lunches (PL) served district- or agency-wide.

 (Site #1) PL Served + (Site #2 PL) Served + (Site #3) PL Served = Total # of PL Served

  1. Divide the Total Monthly Revenue by the Total Monthly Number of Paid Lunches Served to calculate the current weighted average price.

Total MR (from Step 2) / Total # of PL Served (from Step 3) = WAP

Example of Calculating an SFA’s WAP

School District Weighted Average Price Calculator

Site List

Monthly Number of Paid Lunches

Paid Lunch Price

Monthly Revenue
(# of paid lunches served x paid lunch price)

Site #1

1,514

$1.80

$2,725.20

Site #2

5,416

$1.78

$9,640.48

Site #3

5,317

$1.93

$10,261.81

Total Number of Paid Lunches Served

12, 247

Total Monthly Revenue

$22, 627.49

Total Monthly Revenue ($22,627.49) divided by Total Number of Paid Lunches (12,247) = $1.85

Based on the example, the Current WAP is $1.85.

If the WAP is greater than the federal Section 11 free lunch reimbursement rate ($2.51 for SY 2011–12), no further action is required.

However, if the WAP is less than the federal Section 11 reimbursement rate, the SFA must implement one of the following two options to achieve compliance:

  1. Option 1 - Raise the amount charged for paid lunches in the next SY
  2. Option 2 - Contribute financial support (revenue) to the cafeteria fund from a non-federal source
Option 1 – Increase Average Lunch Price

If an SFA chooses to increase its paid lunch price, the SFA must increase its paid lunch price by two (2.0) percent plus the current inflation rate. The current inflation rate is 2.18 percent for a total upward adjustment of 4.18 percent (however, the USDA will adjust this rate annually).

See example below:

Current WAP ($1.85) multiplied by the Inflation Rate (4.18 percent) = $0.08

Based on the example provided above, the recommended WAP is $1.93.

However, SFAs also have the option to round down the “new weighted average lunch price” to the nearest five cents ($0.05). Therefore, instead of increasing the average paid lunch price by $0.08 (as shown above), the SFA may opt to increase its “new weighted average paid lunch price” to $1.90 and achieve compliance. This option gives SFAs a $0.05 range which would be considered an acceptable price increase.

Example of Calculating a New WAP

SFAs should examine the data and information they have on hand (e.g., as provided above):

  1. Current WAP is $1.85
  2. Recommended WAP is $1.93
  3. SFAs can round down to the nearest nickel or $0.05

New Average Lunch Price Requirement
(Adjusted Price Includes 4.18 Percentage Inflation Rate

New WAP ($1.90) – Current WAP ($1.85) = ($0.05)

Based on the information provided above, the SFA must increase their average paid lunch price for SY 2012–13 from $1.85 to $1.90, which is a five cent increase.

SFAs may also increase their average paid meal price more than the required calculated amount. If they choose to do so, then a “credit” will be issued in future school year increases. The USDA is still working on how credits will be implemented.

Note:    SFAs are not required to increase paid lunch prices by more than $0.10 per SY, although SFAs may opt to raise their prices more than $0.10 per SY.

In addition, SFAs have some flexibility to determine how they plan to distribute the average price increase among their school sites to reach their “new WAP.” For example, SFAs may vary lunch prices by charging lower prices in schools located in lower-income areas or charging different prices in elementary and secondary schools as long as the average revenue requirement is met.

For example, an SFA can choose to increase their average paid lunch price at Site #1 by $0.10 (from $1.80 to $1.90), and at Site #2 by $0.10 (from $1.78 to $1.88).

Example of an SFA Increasing Paid Lunch Prices at Various Sites to Meet PLE Requirement

School District Weighted Average Price Calculator

Sites

Monthly Number of Paid Lunches

Paid Lunch Price

Monthly Revenue

Site #1

1,514

(Increase from $1.80)  $1.90

$2,876.60

Site #2

5,416

(Increase from $1.78) $1.88

$10,182.08

Site #3

5,317

$1.93

$10,261.81

Total Number of Paid Lunches Served

12, 247

Total Monthly Revenue

$23,320.49

Total Monthly Revenue ($23,320.49) divided by Total Monthly Number of Paid Lunches (12,247) = $1.90

Based on the example above, changing the prices at Site #1 and Site #2 will allow the SFA to meet the New Revenue Requirement with a WAP of $1.90.

Option 2 – Provide a Non-Federal Funding Contribution

An SFA may choose to contribute financial support (revenue) to its cafeteria fund from non-federal sources, in lieu of increasing lunch prices. In order to calculate the required “Annual Non-Federal Source Contribution” amount, SFAs must obtain and use the following information in their calculations:

  1. Annual Number of Paid Lunches Served for the SY (includes all prices, including those lunches at or above $2.51)
  2. Current WAP (calculated using USDA’s PLE Pricing Tool)
  3. New WAP (calculated using USDA’s PLE Pricing Tool)

To calculate the required non-federal source contribution:

  1. Subtract the Current WAP from the New Minimum WAP to calculate the Minimum Increase amount.

(New Minimum WAP)(Current WAP) = Minimum Increase

Example:  $1.90 (New Minimum WAP) – $1.85 (Current WAP) = $0.05 (Minimum Increase)                             

  1. Multiply the Minimum Increase by the annual number of paid lunches served to calculate the Required Non-federal source contribution.

(Minimum Increase) x (Annual Number of Paid Lunches Served) = Required Non-federal Source Contribution

Example:  $0.05 (Minimum Increase) x 250,500 (Annual Number of Paid Lunches Served) = $12,525.00

Based on the example above, the required non-federal source contribution would be: $12,525.00.

Questions:   Nutrition Services Division | 800-952-5609
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