From the onset of the COVID-19 pandemic, the United States Department of Agriculture (USDA) has provided operational flexibilities and additional funding to School Food Authorities (SFAs) to help overcome challenges and ensure children have continued access to meals. As a result, many SFAs now have a substantial positive balance in their school food service accounts, some in excess of the maximum balance allowed by federal regulations. This memo provides guidance to SFAs on current flexibilities and acceptable uses of the school food service account funds.

Paid Lunch Equity Waiver Permits School Food Service Account to Fund Paid Lunches

SFA election of the paid lunch equity waiver provides SFAs with the flexibility to price student lunches for the 2022-2023 school year at the level the SFA decides is best, based on local needs. This includes lowering lunch prices. USDA has now provided guidance that the election of this waiver includes no repayment to the non-profit food service account should SFAs decide to fund paid lunches during the 2022-2023 school year. SFAs must choose to use the waiver in the Child Nutrition Management System (CNMS) Child Nutrition | NYSED to take advantage of this waiver flexibility. All flexibilities offered under this waiver are set to on expire June 30, 2023.

SFAs should carefully review their school food operations and budgets before lowering or fully funding paid lunch prices in SY 2022-23.  Some considerations include:

• SFAs are receiving an additional 40 cents for every lunch and 15 cents for every breakfast, above the annual inflationary adjustment during the 2022-2023 school year, but these increases are not set to continue after June 30, 2023
• Federal and state reimbursement is still based on student eligibility category (free, reduced-price, paid). Student eligibility must still be determined even if the decision to fund meals is made
• SFAs’ school food service accounts may be temporarily inflated if Supply Chain Assistance Funds (see below) have been received but not yet used to purchase unprocessed or minimally food products
• The price of food remains high, requiring more resources
• Meal quality should not decline as a result of subsidizing paid lunch prices
• Unpaid meal charges cannot be offset with school food service account revenue. SFAs may find it more cost effective to fund paid lunches with food service account funds than find alternate funding for unpaid meal debt.

Funding Paid Breakfasts

Federal regulations continue to allow the school food service account to fund paid breakfasts.   

Funding Reduced-Price Meals and Snacks

SFAs receive additional state funds to cover the cost of breakfast, lunch, and after-school snacks for students in the reduced-price category. As a result, SFAs are prohibited from charging reduced-price students for meals and snacks.

Supply Chain Assistance Funds

Federal Supply Chain Assistance (SCA) Funds are being provided, to SFAs to help deal with challenges in administering child nutrition programs, such as unanticipated cancellation of food and supply contracts, reduced availability of certain foods, unexpected substitution of certain products, unpredictable increases in food and supply prices. SFAs must choose to receive SCA monies from NYSED and must only utilize those funds to buy unprocessed or minimally processed domestic food products. NYSED distributed $56.5 million in SCA funding to SFAs in the Spring of 2022. An additional distribution of $86 million will begin in December 2022. More information on SCA funds can be found at Child Nutrition | NYSED.

School Food Service Fund Balance Requirements

Federal regulations require that school food service accounts are maintained at a balance not to exceed three months’ average expenditures. [7 CFR 210.14(b), 220.7(e)(1)(iv), and 225.15(4)]. These regulations require SFAs that exceed the allowed balance to submit a plan to NYSED regarding how the SFA will reduce its net cash resources to an acceptable level within one year. More information on excess fund balance requirements can be found at Net Cash Resources and Excess Fund Balances | Child Nutrition | NYSED.