[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
   THE RISING COST OF FOOD AND ITS IMPACT ON FEDERAL CHILD NUTRITION 
                                PROGRAMS

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                          EDUCATION AND LABOR

                     U.S. House of Representatives

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

              HEARING HELD IN WASHINGTON, DC, JULY 9, 2008

                               __________

                           Serial No. 110-100

                               __________

      Printed for the use of the Committee on Education and Labor


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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       Howard P. ``Buck'' McKeon, 
    Chairman                             California,
Donald M. Payne, New Jersey            Senior Republican Member
Robert E. Andrews, New Jersey        Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia  Peter Hoekstra, Michigan
Lynn C. Woolsey, California          Michael N. Castle, Delaware
Ruben Hinojosa, Texas                Mark E. Souder, Indiana
Carolyn McCarthy, New York           Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts       Judy Biggert, Illinois
Dennis J. Kucinich, Ohio             Todd Russell Platts, Pennsylvania
David Wu, Oregon                     Ric Keller, Florida
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           John Kline, Minnesota
Danny K. Davis, Illinois             Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona            Kenny Marchant, Texas
Timothy H. Bishop, New York          Tom Price, Georgia
Linda T. Sanchez, California         Luis G. Fortuno, Puerto Rico
John P. Sarbanes, Maryland           Charles W. Boustany, Jr., 
Joe Sestak, Pennsylvania                 Louisiana
David Loebsack, Iowa                 Virginia Foxx, North Carolina
Mazie Hirono, Hawaii                 John R. ``Randy'' Kuhl, Jr., New 
Jason Altmire, Pennsylvania              York
John A. Yarmuth, Kentucky            Rob Bishop, Utah
Phil Hare, Illinois                  David Davis, Tennessee
Yvette D. Clarke, New York           Timothy Walberg, Michigan
Joe Courtney, Connecticut            [Vacancy]
Carol Shea-Porter, New Hampshire

                     Mark Zuckerman, Staff Director
                Sally Stroup, Republican Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on July 9, 2008.....................................     1

Statement of Members:
    Altmire, Hon. Jason, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............    85
    Biggert, Hon. Judy, a Representative in Congress from the 
      State of Illinois, submission for the record:
        Statement of Beth Hillson, the American Celiac Disease 
          Alliance (ACDA)........................................    85
    Hare, Hon. Phil, a Representative in Congress from the State 
      of Illinois, prepared statement of.........................    86
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................    87
    McCarthy, Hon. Carolyn, a Representative in Congress from the 
      State of New York, prepared statement of...................    87
    McKeon, Hon. Howard P. ``Buck,'' Senior Republican Member, 
      Committee on Education and Labor...........................     4
        Prepared statement of....................................     6
    Miller, Hon. George, Chairman, Committee on Education and 
      Labor......................................................     1
        Prepared statement of....................................     3
        Additional submissions for the record:
            Coalition letter to the Environmental Protection 
              Agency, dated June 23, 2008........................    75
            Statement of Connie Tipton, president and CEO, 
              International Dairy Foods Association..............    80
            Letter from Flavio Cumpiano, Executive Director, 
              Federal Affairs Administration, Commonwealth of 
              Puerto Rico........................................    83
            Statement of Paule T. Pachter, A.C.S.W., L.M.S.W., 
              executive director, Long Island Cares, Inc., the 
              Harry Chapin Food Bank.............................    84
    Woolsey, Hon. Lynn C., a Representative in Congress from the 
      State of California, prepared statement of.................    88

Statement of Witnesses:
    Faber, Scott, vice president for Federal affairs, on behalf 
      of the Grocery Manufacturers Association...................    17
        Prepared statement of....................................    18
        Responses to questions for the record....................    89
        Additional submissions for the record:
            ``Global Agricultural Supply and Demand: Factors 
              Contributing to the Recent Increase in Food 
              Commodity Prices''.................................    23
            ``Another Inconvenient Truth: How biofuel policies 
              are deepening poverty and accelerating climate 
              change''...........................................    23
            ``The Role of Biofuels and Other Factors in 
              Increasing Farm and Food Prices''..................    23
            ``World Economic Outlook,'' October 2007.............    23
            ``World Bank response to rising food prices''........    23
    Harnett, James J., president & CEO, Family and Children's 
      Association................................................    31
        Prepared statement of....................................    33
        Responses to questions for the record....................    90
        Additional submission for the record:
            ``Currents: Summer Camp as Food Relief--Low-Income 
              Families in U.S. Make the Most of a Vital 
              Lifeline,'' Wall Street Journal, July 8, 2008......    36
    Houston, Kate, Deputy Under Secretary, Food, Nutrition and 
      Consumer Services, U.S. Department of Agriculture..........    13
        Prepared statement of....................................    15
        Questions for the record.................................    91
    James, Paula, Contra Costa Child Care Council, California 
      CCFP Roundtable, National CACFP Forum......................    38
        Prepared statement of....................................    40
        Responses to questions for the record....................    93
        Additional submissions for the record:
            ``The Child and Adult Care Food Program Supports Good 
              Nutrition in Quality Child Care''..................    45
            Contra Costa Child Care Council ``Nutrition 
              Edition,'' July 2008...............................    46
            Childhood nutrition flyers...........................    52
            ``Sample Nutrition Policy''..........................    53
    Leibtag, Dr. Ephraim, research economist, U.S. Department of 
      Agriculture................................................     8
        Prepared statement of....................................    10
        Questions for the record.................................    94
    Matustik, Pavel N., CAO, Santa Clarita Valley School Food 
      Services Agency............................................    27
        Prepared statement of....................................    29
    Wilson, Katie, president-elect of the School Nutrition 
      Association; food and nutrition coordinator, Onalaska 
      School District............................................    24
        Prepared statement of....................................    25
        Responses to questions for the record....................    94


   THE RISING COST OF FOOD AND ITS IMPACT ON FEDERAL CHILD NUTRITION 
                                PROGRAMS

                              ----------                              


                        Wednesday, July 9, 2008

                     U.S. House of Representatives

                    Committee on Education and Labor

                             Washington, DC

                              ----------                              

    The committee met, pursuant to call, at 10:02 a.m., in Room 
2175, Rayburn House Office Building, Hon. George Miller 
[chairman of the committee] presiding.
    Present: Miller, Kildee, Scott, Woolsey, Hinojosa, 
McCarthy, Tierney, Kucinich, Wu, Davis of California, Bishop of 
New York, Sarbanes, Sestak, Yarmuth, Courtney, Shea-Porter, 
McKeon, Petri, Castle, Platts, Keller, Kline, Foxx, and Kuhl.
    Staff present: Tylease Alli, Hearing Clerk; Alejandra Ceja, 
Senior Budget/Appropriations Analyst; Denise Forte, Director of 
Education Policy; David Hartzler, Systems Administrator; Liz 
Hollis, Special Assistant to Staff Director; Lloyd Horwich, 
Policy Advisor, Subcommittee on Early Childhood, Elementary and 
Secretary Education; Fred Jones, Staff Assistant, Education; 
Deborah Koolbeck, Policy Advisor, Subcommittee on Healthy 
Families and Communities; Ann-Frances Lambert, Special 
Assistant to Director of Education Policy; Sharon Lewis, Senior 
Disability Policy Advisor; Stephanie Moore, General Counsel; 
Alex Nock, Deputy Staff Director; Joe Novotny, Chief Clerk; 
Rachel Racusen, Communications Director; Michele Varnhagen, 
Labor Policy Director; Margaret Young, Staff Assistant, 
Education; and Mark Zuckerman, Staff Director; Stephanie Arras, 
Minority Legislative Assistant; James Bergeron, Minority Deputy 
Director of Education and Human Services Policy; Cameron 
Coursen, Minority Assistant Communications Director; Kirsten 
Duncan, Minority Professional Staff Member; Susan Ross, 
Minority Director of Education and Human Services Policy; Linda 
Stevens, Minority Chief Clerk/Assistant to the General Counsel; 
and Sally Stroup, Minority Staff Director.
    Chairman Miller [presiding]. Good morning. A quorum being 
present, the hearing will come to order.
    And the chair will yield to himself for the purposes of 
making an opening statement and then yield to the senior 
Republican, Mr. McKeon.
    Welcome to today's hearing on ``The Rising Cost of Food and 
Its Impact on Federal Child Nutrition Programs.'' Today we will 
take a look at soaring food costs and the toll that they are 
taking on the nation's child nutrition programs.
    From news headlines to the aisles in the grocery store, it 
is impossible to ignore the fact that food costs have escalated 
dramatically over the past year, making it more and more 
difficult for American families to pay grocery bills and put 
healthier foods on the table.
    Given this tough economic climate, our federal child 
nutrition programs have an increasingly important role to play 
in providing children with healthy and nutritious foods while 
at school, child care, and the summer camp programs.
    All together, nearly 50 million children each year are 
served by the National School Lunch Program, the School 
Breakfast Program, the Child and Adult Care Food Program, and 
the summer food service programs, which provide free meals and 
snacks to children in low-income communities over the summer 
vacation.
    But with food prices continuing to rise drastically and no 
signs of slowing down any time soon, it is becoming hard for 
these programs to continue providing healthy, low-cost meals 
that children will want to eat.
    As demonstrated by the chart on the wall, the prices of 
many staple foods are on the rise. The U.S. Department of 
Agriculture reports that the cost of basic essentials like 
bread, milk and cheese rose by a staggering 17 percent in 2007.


    Yet, during this same period, the federal reimbursement 
rate for child nutrition programs increased by only about 3 to 
4 percent. Other than annual indexed adjustments, the 
reimbursement rate for the National School Lunch Program has 
remained stagnant for more than two decades.
    With the fall fast approaching, these increases are forcing 
school districts operating under already-tight budgets to make 
some very tough choices. Many report having to use frozen 
vegetables instead of fresh vegetables, processed wheat 
products instead of whole grains, and prepackaged foods instead 
of more nutritious entrees that involve additional preparation 
costs.
    In my own district in California, one school nutrition 
director reported that produce is up nearly 10 percent, frozen 
and dry foods are up nearly 20 percent, and dairy products are 
up more than 20 percent.
    Other districts report having to scale back the number of 
meals they provide and cutting down on staff to reduce labor 
costs. For many summer food programs currently struggling to 
meet these higher costs, increased food prices has led to 
serving fewer kids.
    In the wake of waning federal support, states and school 
districts are shouldering more of the cost of school meals. The 
School Nutrition Association reports that school lunches cost 
an average of over $2.90 to prepare. Even with the recent 
adjustment announced this month, the federal subsidy for free 
meals will still only reimburse schools for $2.57, leaving 
school districts to cover the difference.
    Schools have limited options to increase revenues or 
decrease expenses. Again, as the chart on the wall 
demonstrates, a recent USDA study showed that the full cost of 
producing school meals exceeds reported costs by an average of 
19 percent. According to SNA's estimates, U.S. schools will 
incur a loss of about $5 million to $8 million each school day 
in order to feed 30 million children.
    Without sufficient federal resources, many states and 
school districts often have to rely on the sales of popular but 
less nutritious foods, like pizza, french fries and sodas, to 
help generate the revenue needed to subsidize healthier meal 
options.
    In some cases, higher food prices are forcing some programs 
to question whether they can continue participating in the 
federal nutrition program all together, meaning that fewer 
children may have access to healthy meals.
    Today we will hear from several witnesses who have 
firsthand knowledge of the impact of rising food costs on their 
programs and the challenge of providing healthy meals. We will 
also hear from officials at the U.S. Department of Agriculture, 
the agency responsible for running our federal child nutrition 
programs. And we will hear from the Grocery Manufacturers 
Association.
    I would like to thank all of you for joining us today and 
look forward to hearing your testimony.
    Providing children with access to healthier, nutritious 
foods while at child care, school or summer camps is vital to 
our efforts to help children learn, succeed and thrive. And at 
a time when the U.S. faces staggering rates of childhood 
obesity, helping young children develop healthy and nutritious 
eating habits must be a top national priority.
    And, with that, I would like to yield such time as he may 
consume to Mr. McKeon, the senior Republican on the committee.
    [The statement of Mr. Miller follows:]

   Prepared Statement of Hon. George Miller, Chairman, Committee on 
                          Education and Labor

    Good Morning. Welcome to today's hearing on ``The Rising Costs of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Today we will take a look at soaring food costs, and the toll 
they're taking on our nation's child nutrition programs.
    From news headlines to the aisles at the grocery store, it's 
impossible to ignore the fact that food costs have escalated 
dramatically over the past year--making it more and more difficult for 
American families to pay the grocery bills and put healthier foods on 
the table.
    Given this tough economic climate, our federal child nutrition 
programs have an increasingly important role to play in providing 
children with healthy and nutritious foods while at school, childcare, 
or summer camp programs.
    Altogether, nearly fifty million children each year are served by 
the National School Lunch Program, the School Breakfast Program, the 
Child and Adult Care Food Program, and summer food service programs, 
which provide free meals and snacks to children in low-income 
communities over summer vacation.
    But with food prices continuing to rise drastically--with no signs 
of slowing down anytime soon--it is becoming tremendously hard for 
these programs to continue providing healthy, low-cost meals that 
children will want to eat.
    As demonstrated by the chart on the wall, the prices of many staple 
foods are on the rise. The U.S. Department of Agriculture reports that 
the cost of basic essentials like bread, milk, and cheese rose by a 
staggering 17 percent in 2007. Yet during this same period the federal 
reimbursement rate for child nutrition programs increased by only about 
3-4 percent. Other than annual indexed adjustments, the reimbursement 
rate for the National School Lunch Program has remained stagnant for 
more than two decades.
    With the fall fast approaching, these increases are forcing school 
districts operating under already-tight budgets to make some very tough 
choices.
    Many report having to use frozen vegetables instead of fresh 
vegetables, processed wheat products instead of whole grains, and 
prepackaged foods instead of more nutritious entrees that involve 
additional preparation costs.
    In my own district in California, one school nutrition director 
reported that produce is up nearly 10 percent, frozen and dry foods are 
up nearly 20 percent, and dairy products are up more than 20 percent.
    Other districts report having to scale back the number of meals 
they provide, and cutting down on staff to reduce labor costs.
    For many summer food programs currently struggling to meet these 
higher costs, increasing food prices has led to serving fewer kids.
    In the wake of waning federal support, states and school districts 
are shouldering more of the cost of school meals.
    The School Nutrition Association reports that school lunches cost 
an average of over $2.90 to prepare. Even with the recent adjustment 
announced this month, the federal subsidy for free meals will still 
only reimburse schools $2.57--leaving school districts to cover the 
difference. Schools have limited options to increase revenue or 
decrease expenses. As the chart on the wall demonstrates, a recent USDA 
study showed that the full cost of producing school meals exceeds 
reported costs by an average of 19 percent.
    According to the SNA's estimates, U.S. schools will incur a loss of 
$5 million to $8 million each school day in order to feed 30 million 
children.
    Without sufficient federal resources, many states and school 
districts often have to rely on the sales of popular but less 
nutritious foods, like pizza, french fries, and sodas, to help generate 
the revenue needed to subsidize healthier meal options.
    In some cases, higher food prices are forcing some programs to 
question whether they can continue participating in the federal 
nutrition program altogether--meaning that fewer kids may have access 
to healthy meals.
    Today we will hear from several witnesses who have firsthand 
knowledge about the impact of rising food costs on their programs and 
the challenge of providing healthy meals. We will also hear from 
officials at the U.S. Department of Agriculture, the agency responsible 
for running our federal child nutrition programs.
    I'd like to thank all of you for joining us today and look forward 
to hearing your thoughts.
    Providing children with access to healthier, nutritious foods while 
at childcare, school, or summer camp is vital to our efforts to help 
all children learn, succeed and thrive. And at a time when the U.S. 
faces staggering rates of childhood obesity, helping young children 
develop healthy and nutritious eating habits must be a top national 
priority.
    Thank you.
                                 ______
                                 
    Mr. McKeon. Thank you, Chairman Miller. And good morning.
    We are here today to examine the rising cost of food and 
its impact on federal child nutrition programs. The federal 
child nutrition programs are vitally important to our efforts 
to promote good health, prevent childhood obesity, and address 
hunger and food insecurity.
    From the WIC program that helps provide nutritious foods to 
pregnant women and young children, to the National School Lunch 
and Breakfast Programs which provide healthy meals and snacks 
to an estimated 31 million students, these programs make a real 
difference in schools and communities where children struggle 
with hunger and poor nutrition.
    Federal child nutrition programs account for fully one-
quarter of the U.S. Department of Agriculture's domestic food 
and nutrition assistance outlays. In fiscal year 2007, USDA 
spent $13.4 billion on these programs that provide a 
nutritional safety net for children.
    Unfortunately, that investment is being undermined by 
rapidly rising food costs, which are driven in large part by 
exploding energy costs. Make no mistake about it: A major 
factor behind rising food prices in the federal child nutrition 
programs and on supermarket shelves around the country is the 
cost of fuel and the impact of America's energy policies.
    I am glad we are here today to discuss the impact of rising 
food prices on child nutrition programs, but we shouldn't be 
having this conversation in a vacuum. We cannot afford to 
ignore the role of energy policy in the food cost equation.
    We have energy policies, or a lack thereof, that are 
driving up prices at every stage of the process. From greater 
competition for land and increased feed costs driven by ethanol 
mandates to the higher cost of transporting foods and stocking 
grocery shelves and school pantries because of the price at the 
pump, food prices are inextricably linked to energy prices.
    Given these facts, one would assume that the House would be 
acting aggressively to tackle high energy prices. After all, 
there is no shortage of ideas about how to rein in energy costs 
and put America on a path to energy independence.
    Before the Memorial Day break, House Republicans outlined 
an all-of-the-above energy plan to increase production of 
American-made energy, encourage more conservation and 
efficiency, and promote the use of alternative fuels. 
Republicans are also signing discharge petitions so that 
important energy reforms that remain bottled up in committees 
are finally given the up-or-down vote they deserve.
    So what is the majority doing about the energy crisis that 
is driving up food costs and making it more difficult to combat 
hunger in our schools? According to an article that appeared in 
The Hill newspaper just yesterday, ``Worried that a floor vote 
on any energy-related measure would trigger a Republican-forced 
vote on domestic drilling, the leadership has scrubbed the 
floor schedule of the energy legislation that it vowed to 
tackle after the Fourth of July recess.''
    That is unconscionable, and the American people agree. Poll 
after poll has shown that Americans agree and recognize the 
need for comprehensive energy solutions.
    And a growing majority of Americans now support increased 
domestic production. According to a recent CNN poll, 73 percent 
of Americans support offshore drilling for oil and natural gas 
in the U.S. waters in order to increase the availability of 
American-made energy. Yet the Democratic Congress continues to 
throw up roadblocks to real energy reform.
    I am deeply concerned about food prices. The federal child 
nutrition programs serve some of the most vulnerable members of 
our society, and we cannot allow high food prices to prevent us 
from giving nutritional support to those in need.
    It is time to have a real conversation about America's 
energy policies, and it is time to take real action to bring 
down prices. As today's hearing will demonstrate, the cost 
being borne by our children, families, schools and communities 
is just too great.
    I yield back.
    [The statement of Mr. McKeon follows:]

Prepared Statement of Hon. Howard P. ``Buck'' McKeon, Senior Republican 
                Member, Committee on Education and Labor

    Thank you Chairman Miller, and good morning. We're here today to 
examine the rising cost of food and its impact on federal child 
nutrition programs.
    The federal child nutrition programs are vitally important to our 
efforts to promote good health, prevent childhood obesity, and address 
hunger and food insecurity. From the WIC program that helps provide 
nutritious foods to pregnant women and young children to the National 
School Lunch and Breakfast Programs, which provide healthy meals and 
snacks to an estimated 31 million students, these programs make a real 
difference in schools and communities where children struggle with 
hunger and poor nutrition.
    Federal child nutrition programs account for fully one-quarter of 
the U.S. Department of Agriculture's domestic food and nutrition 
assistance outlays. In fiscal year 2007, USDA spent $13.4 billion on 
these programs that provide a nutritional safety net for children. 
Unfortunately, that investment is being undermined by rapidly rising 
food costs, which are driven in large part by exploding energy costs. 
Make no mistake about it, a major factor behind rising food prices in 
the federal child nutrition programs and on supermarket shelves around 
the country is the cost of fuel and the impact of America's energy 
policies.
    I'm glad we're here today to discuss the impact of rising food 
prices on child nutrition programs. But we shouldn't be having this 
conversation in a vacuum.
    We cannot afford to ignore the role of energy policy in the food 
cost equation. We have energy policies--or a lack thereof--that are 
driving up prices at every stage of the process. From greater 
competition for land and increased feed costs driven by ethanol 
mandates to the higher cost of transporting foods and stocking grocery 
shelves and school pantries because of the price at the pump, food 
prices are inextricably linked to energy prices.
    Given these facts, one would assume that the House would be acting 
aggressively to tackle high energy prices. After all, there's no 
shortage of ideas about how to rein in energy costs and put America on 
a path to energy independence.
    Before the Memorial Day break, House Republicans outlined an ``all 
of the above'' energy plan to increase production of American-made 
energy, encourage more conservation and efficiency, and promote the use 
of alternative fuels.
    Republicans are also signing discharge petitions so that important 
energy reforms that remain bottled up in committees are finally given 
the up-or-down vote they deserve.
    So what is the majority doing about the energy crisis that is 
driving up food costs and making it more difficult to combat hunger in 
our schools? According to an article that appeared in The Hill 
newspaper just yesterday--and I quote--``Worried that a floor vote on 
any energy-related measure would trigger a Republican-forced vote on 
domestic drilling, the leadership has scrubbed the floor schedule of 
the energy legislation that it vowed to tackle after the Fourth of July 
recess.''
    This is unconscionable, and the American people agree. Poll after 
poll has shown that Americans recognize the need for comprehensive 
energy solutions, and a growing majority of Americans now support 
increased domestic production. According to a recent CNN poll, 73 
percent of Americans support offshore drilling for oil and natural gas 
in U.S. waters in order to increase the availability of American-made 
energy. Yet the Democratic Congress continues to throw up road blocks 
to real energy reform.
    I'm deeply concerned about food prices. The federal child nutrition 
programs serve some of the most vulnerable members of our society, and 
we cannot allow high food prices to prevent us from giving nutritional 
support to those in need.
    It's time to have a real conversation about America's energy 
policies, and it's time to take real action to bring down prices. As 
today's hearing will demonstrate, the cost being borne by our children, 
families, schools, and communities is just too great.
    I yield back.
                                 ______
                                 
    Chairman Miller. I thank the gentleman for his statement.
    And pursuant to committee rule 12-A, any member may submit 
an opening statement in writing, which will be made part of the 
permanent record.
    And, again, I would like to welcome our panel that is here 
today to share your thoughts and your expertise with the 
committee.
    And we will begin with Dr. Leibtag, who is an economist 
with the U.S. Department of Agriculture's Economic Research 
Service. Mr. Leibtag researches retail food prices and the 
dynamics of retail food marketing. And his current projects 
include the CPI for food forecasting and analysis, research on 
food prices and food purchase behavior, and the supermarket 
characteristics.
    Kate Houston is the USDA's deputy undersecretary for food, 
nutrition and consumer services. Ms. Houston is responsible for 
developing and promoting science-based dietary guidance in 
administering of USDA's 15 nutrition assistance programs.
    Scott Faber is the vice president for federal affairs for 
the Grocery Manufacturers Association. Prior to joining the 
Grocery Manufacturers Association, Mr. Faber was an expert on 
agriculture policy for the Environmental Defense Fund.
    Katie Wilson is presently serving as the president-elect of 
the School Nutrition Association. She has been a school 
nutrition director in Wisconsin for 18 years.
    Pavel Matustik is going to be introduced by Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman.
    I appreciate the opportunity to introduce our next witness. 
Pavel Matustik is chief administrative officer for the Santa 
Clarita Valley School Food Services Agency in my congressional 
district. The agency provides food service for five local 
school districts and is the lead agency for the California 
Commodities SUPER Co-Op.
    Pavel came to the United States in 1982 after his escape 
from the formerly communist country of Czechoslovakia. He has 
more than 20 years' experience in school food services, having 
earned certification in hotel and restaurant management and 
been credentialed by the School Nutrition Association.
    Pavel served as the president for the California School 
Food Services Association and is a recipient of the 2004 Fame 
Leadership Award, the 2006 Gold Fame Best Director Award, and 
the 2007 Silver Plate Award. It is great having a celebrity in 
our district.
    He presently serves on the executive board of the American 
Commodity Distribution Association.
    Welcome, Pavel.
    Chairman Miller. Thank you.
    I will now recognize Mrs. McCarthy for the purpose of an 
introduction.
    Mrs. McCarthy. I want to thank the chairman for this 
hearing, and I am pleased that I have the opportunity to 
introduce a constituent of mine, Mr. James Harnett.
    He comes to D.C. from Mineola, New York, where he is the 
president and CEO of the Family and Children's Association, 
which serves the people of Long Island.
    The Family and Children's Association offers 40 programs to 
Long Islanders, including a summer food program which feeds 
school-aged children. This program is vital for many of the 
kids in my district.
    However, this is not his first position in service to 
others. Mr. Harnett's legacy of service begins with his service 
in the Peace Corps. He continued through his service in 
nonprofits seeking to improve the lives of honorable people in 
New York, most often in management positions. He has even 
served as administrator of the Department of Pediatrics at 
Columbia University.
    Immediately prior to joining Family and Children's 
Association, he served as the executive vice president, COO, 
and secretary of cooperation of Covenant House, an organization 
dedicated to servicing runaway and homeless youth.
    I am glad that he is here today to tell us the story of 
what it is like to be an on-the-ground provider of meals to 
children and the impact of increased food prices on his 
operation.
    I look forward to learning about these programs from you 
today. And welcome.
    I also want to mention that, in the past, he has raised 
over $100,000 so that he could feed the children of Long 
Island. And this happened way before the gas prices went up. 
And we cannot drill our way out of this problem.
    Thank you.
    Chairman Miller. It is a pleasure for me to introduce Paula 
James from my congressional district, who is mainly here 
because she is the director of the Contra Costa Child Care 
Council Child Health and Nutrition Program.
    She serves on the board of the national Child and Adult 
Care Food Program Forum and chairs the California Child Care 
Food Program Roundtable and serves on the California Department 
of Education Child Nutrition Advisory Council.
    Welcome to the committee, and we look forward to your 
testimony and all of our witnesses.
    We are going to begin, Dr. Leibtag, with you. When you 
begin, a green light in front of you is going to go on. We give 
you 5 minutes here. And with 1 minute remaining, a yellow light 
will go on. We would like you to see if you could bring your 
testimony to a conclusion in a coherent fashion that you are 
comfortable with. And then we will have time for questions from 
the committee when all of the panelists have testified.
    Again, welcome, and thank you for your time and your 
expertise.

  STATEMENT OF EPHRAIM LEIBTAG, ECONOMIST, U.S. DEPARTMENT OF 
            AGRICULTURE'S ECONOMIC RESEARCH SERVICE

    Mr. Leibtag. Good morning, Mr. Chairman and members of the 
committee. My name is Ephraim Leibtag. I work as an economist 
with the USDA's Economic Research Service. My main area of 
expertise is retail food prices and the dynamics of retail food 
markets. And I appreciate the opportunity to speak to you today 
about recent trends in U.S. retail food prices.
    In 2008, we project the Consumer Price Index for all food 
will increase 4.5 to 5.5 percent, the largest increase since 
1990. This acceleration in food price inflation is primarily 
due to higher food commodity input and energy costs.
    The main factors behind higher food commodity costs include 
stronger global demand for food, increased U.S. agricultural 
exports resulting from that stronger demand, weather-related 
production problems in some areas of the world, and the 
increased use of some food commodities such as corn and 
soybeans for bioenergy uses.
    To better analyze recent trends, we need to understand how 
food prices and price changes are measured. Food prices are 
measured by the federal government through monthly collection 
of prices from a representative group of food stores and food 
service establishments.
    The All-Items CPI is composed of a number of sub-indexes, 
including the Food CPI. Within the Food CPI, food indexes 
reported for food at home, which consists of foods sold in 
retail outlets, and food away from home, which consists of 
meals, entrees and other prepared foods sold in eating and 
drinking establishments and noncommercial food service outlets. 
To obtain the Food CPI, the separate indices of the at-home and 
away-from-home segments are combined, using their respective 
expenditure shares.
    Our current forecasts predict that food-at-home prices will 
increase 5 to 6 percent this year, while food-away-from-home 
prices are forecasted to increase 3.5 to 4.5 percent in 2008.
    As a point of comparison, the All-Foods CPI increased 4 
percent between 2006 and 2007, with food-at-home prices 
increasing 4.2 percent and food-away-from-home prices 
increasing 3.6 percent. The 15-year average increase in food 
prices prior to 2007 was 2.5 percent per year.
    As I mentioned earlier, food commodity prices have been 
rising due to a number of factors. For corn specifically, these 
factors helped push prices from under $2 per bushel in 2005 to 
$3.40 in 2007 and currently over $7 as of the middle of this 
year. This is just one example of how commodity prices have 
been increasing.
    These higher food commodity costs do pass through to retail 
prices but at a lower rate. In general, retail food prices are 
much less volatile than farm-level prices and tend to rise by a 
fraction of the change in farm prices. The magnitude of 
response depends on both the retailing costs beyond the raw 
food ingredients and the nature of competition in retail food 
markets.
    Turning now to some specific retail food categories, fresh 
fruit and vegetables, meat and poultry and eggs have relatively 
less processing and packaging than other commodities. Changes 
in farm-level prices of these products have a larger impact on 
retail prices as a result.
    There are also seasonality factors contributing to 
volatility of produce prices, whose supply and price variation 
are influenced by extremes of weather and growing conditions. 
Because most produce commodities are highly perishable, supply 
and prices are more sensitive to adverse growing conditions.
    In contrast to raw commodities, the farm value share in 
many processed foods is quite small, and this moderates the 
effect of rising prices. For example, an 18-ounce box of 
cornflakes contains about 13 ounces of corn. Historically, the 
actual value of corn represented in the box of cornflakes was 
about 1 percent of the cereal price. The almost 50 percent 
increase in corn prices in 2007 would be expected to raise the 
price of a box of cereal by about .5 percent, assuming no other 
cost increases. This implies that the near 100 percent increase 
in corn prices from 2007 to 2008 would increase the cornflakes 
price by about 1 percent.
    Food service operators sometimes look at the Producer Price 
Index, the PPI, since it measures prices received by 
processors, suppliers and wholesalers. Both farm and processed 
products are included in the PPI, and it more closely 
represents the price change in food products purchased by food 
retailers and food service operators. For some food 
commodities, the PPI is more volatile than the consumer price 
indexes for those items.
    Food service operators purchase both products with a high 
farm value component, such as milk, as well as more highly 
processed foods having lower commodity or farm value, such as 
cereal or pizza. Suppliers to the food-away-from-home segment 
offer both traditional foods requiring additional preparation, 
as well as highly processed, value-added foods such as heat-
and-serve entrees.
    So a good understanding of all of these price index 
measures is important when trying to predict future food costs.
    Looking ahead, the department's current long-term 
projections indicate that retail food price inflation will 
gradually moderate over the next several years.
    Continued expansion of biofuels production will likely 
maintain corn and soybean prices at historically high levels, 
and livestock producers may adjust to the increase in feed 
costs by reducing production, leading to higher retail prices 
for meat and poultry products in the longer term.
    However, in addition, global agricultural production is 
expected to rebound, especially for wheat, relieving some of 
the pressure on retail food prices for cereal and bakery goods.
    Of course, future increases in retail food prices also 
depend heavily on energy prices and other food marketing costs 
that are independent of the food commodity market.
    Mr. Chairman, this concludes my statement. I will be glad 
to answer any questions the committee may have.
    [The statement of Mr. Leibtag follows:]

     Prepared Statement of Dr. Ephraim Leibtag, Research Economist,
                     U.S. Department of Agriculture

    Mr. Chairman and Members of the Committee, my name is Ephraim 
Leibtag and I am an economist with the USDA's Economic Research Service 
researching retail food prices and the dynamics of retail food markets. 
I appreciate the opportunity to speak to you today about trends in U.S. 
food prices.
    In 2008, the Consumer Price Index (CPI) for all food is projected 
to increase 4.5 to 5.5 percent, as retail prices reflect higher 
commodity and energy costs. The main factors behind higher food 
commodity costs include stronger global demand for food, increased U.S. 
agricultural exports resulting from stronger demand, weather-related 
production problems in some areas of the world, and the increased use 
of some food commodities, such as corn, for bioenergy uses.
    Food-at-home prices are forecast to increase 5.0 to 6.0 percent, 
while food-away-from-home prices are forecast to increase 3.5 to 4.5 
percent in 2008. The all-food CPI increased 4.0 percent between 2006 
and 2007, the highest annual increase since 1990. Food-at-home prices, 
led by eggs, dairy, and poultry prices, increased 4.2 percent, while 
food-away-from-home prices rose 3.6 percent in 2007.
    Because a full assessment of crop damage was not available at the 
time of this forecast, this update does not explicitly account for 
potentially higher corn and soybean prices due to crop damage from 
recent flooding in the Midwest. Estimates of the impact of potential 
supply disruptions on food prices will be included in this data series 
once an assessment of the flood losses becomes available.
Measuring Food Price Change
    To better understand recent trends, we need to know how food prices 
and price changes are measured. Food prices are measured by the Federal 
government through monthly collection of prices from a representative 
group of food-stores and foodservice establishments. Items selected for 
price measurement cover all consumer goods and services.
    The Federal government has two basic measures of price change, both 
of which compare prices in a base year to prices in a current year: The 
Consumer Price Index (CPI), and the Producer Price Index (PPI). For 
products purchased by consumers, the All-Items CPI is used to represent 
average increases or decreases in prices paid for retail goods and 
services. The All-Items CPI is composed of a number of sub indexes, 
including the Food CPI.
    There are separate food indexes reported for food-at-home, which 
consists of food sold in retail outlets, and food-away-from-home, which 
consists of meals, entrees, and other prepared foods sold in eating and 
drinking establishments, and non-commercial (institutional) foodservice 
outlets. To obtain the Food CPI, the separate indices of the at-home 
and away-from-home segments are combined, using their respective 
expenditure shares.
    Food accounts for 13.8 percent of all expenditures in the All-Items 
CPI. Of total expenditures, food-at-home accounts for 7.66 percent 
while away-from-home accounts for the remaining 6.17 percent.
May 2008 Retail Food Prices Compared to Last Year
    The CPI for all food in May 2008 is 5.1 percent higher than the May 
2007 level. The food-at-home index is 5.8 percent above last May, while 
the food-away-from-home index is 4.3 percent above last May. The all-
items CPI is currently 4.2 percent above the May 2007 level.
    Beef prices are 1.5 percent above last May, as higher energy and 
feed costs have begun to increase beef prices. Pork prices, while 
increasing in recent months, are down 0.6 percent from last May's 
level. Strong short-term pork supplies have been the main factor behind 
recent retail price declines, but pork prices may rise over the next 2 
years as current supplies are sold and future production slows due to 
higher production costs. Poultry prices are up 4.5 percent from last 
year at this time. Higher feed and energy costs in 2007 and early 2008 
have caused poultry prices to rise faster than normal over the past 18 
months.
    Egg prices are 18.2 percent above the May 2007 level. Increased 
demand overseas and higher prices for chicken feed lead to higher egg 
prices at grocery stores. Dairy prices are up 11.0 percent from the May 
2007 level. Within the dairy category, prices changed as follows: milk 
prices are 10.2 percent above last May's prices; cheese prices are 14.0 
percent above last May's level; ice cream and related product prices 
are 5.9 percent above last May; and butter prices are 3.8 percent above 
last May.
    Fresh fruit prices are up 4.7 percent from last year at this time, 
with apple prices up 7.4 percent and banana prices up 21.7 percent, 
while orange prices are down 15.3 percent. Since last year at this 
time, fresh vegetable prices are up 1.8 percent, with lettuce prices up 
1.0 percent, tomato prices up 4.0 percent, potato prices up 3.5 
percent, and other fresh vegetable prices up 0.5 percent.
    Cereals and bakery product prices are up 10.5 percent from last 
year at this time as higher wheat, corn, and energy prices have pushed 
up production costs for these products. Sugar and sweets prices are 5.5 
percent above last May. Within the nonalcoholic beverages category, 
carbonated drink prices are up 2.8 percent from May 2007; coffee prices 
are 8.5 percent higher than last May; and non-frozen noncarbonated 
juices and drinks prices 7.7 percent above the May 2007 level.
Why Higher Food Prices?
    Record U.S. trade, driven by economic growth in developing 
countries and favorable exchange rates, combined with tight global 
grain supplies, resulted in record or near-record prices for corn, 
wheat, soybeans, and other food and feed grains in 2007 and 2008. For 
corn, these factors, along with increased demand for ethanol, helped 
push prices from under $2 per bushel in 2005 to $3.40 per bushel in 
2007, and over $7 as of the middle of this year. Higher corn prices 
motivated farmers to increase corn acreage in 2007 at the expense of 
other crops, such as soybeans and cotton, raising their prices as well.
    What effect do these higher commodity costs have on retail food 
prices? In general, retail food prices are much less volatile than 
farm-level prices and tend to rise by a fraction of the change in farm 
prices. The magnitude of response depends on both the retailing costs 
beyond the raw food ingredients and the nature of competition in retail 
food markets.
    Several key factors influence how an input cost increase affects 
the prices of food under conditions of competition. For a given 
increase in an input's cost, the larger will be an increase in the food 
product's price when:
     The share of the input in the total cost of producing food 
products is larger.
     The input has fewer good substitutes in the food 
production process--that is, few other inputs or processes could be 
used to produce the food product.
     Consumers have few good substitutes for the food product, 
in which case consumers do not decrease purchases substantially when 
the price is higher.
     Prices are expected to remain high for a long period of 
time.
    Retail prices for fresh fruits, vegetables, and eggs have a 
relatively high farm value share compared to other commodities. Changes 
in farm-level prices of these products have a larger impact on retail 
prices as a result. There are also seasonality factors contributing to 
volatility of produce (fresh fruits and vegetables) prices. Produce 
supply and price variation are also influenced by extremes of weather 
and growing conditions, such as droughts, floods, freezes, and pests. 
Because most produce commodities are highly perishable, supply and 
prices are highly sensitive to adverse growing conditions.
    In contrast to raw commodities, the farm value share in many 
processed products is quite small, which moderates the effect of rising 
prices. For example, an 18-ounce box of corn flakes contains about 12.9 
ounces of milled field corn. When field corn is priced at $2.28 per 
bushel (the 20-year average), the actual value of corn represented in 
the box of corn flakes is about 3.3 cents (1 bushel = 56 pounds). (The 
remainder is packaging, processing, advertising, transportation, and 
other costs.) At $3.40 per bushel, the average price in 2007, the value 
is about 4.9 cents. The 49-percent increase in corn prices would be 
expected to raise the price of a box of corn flakes by about 1.6 cents, 
or 0.5 percent, assuming no other cost increases.
Prices Paid by Food Service
    The Producer Price Index, measures prices received by processors, 
suppliers, and wholesalers, depending on the product. Both farm and 
processed products are included in the PPI. Similar to the CPI, the 
indexes are reported monthly and annually. The PPI should more closely 
represent the price change in food products purchased by food retailers 
and food service operators. For many food commodities, the PPI is much 
more volatile compared with consumer price indexes.
    Food service operators purchase both products with a high farm 
value component, such as milk or apple juice, as well as more highly 
processed foods having lower commodity/farm value, such as cereal or 
pizza. Suppliers to the food-away-from-home segment offer both 
traditional foods requiring additional preparation, as well as highly 
processed, value-added foods such as heat-and-serve entrees.
Looking Ahead
    The Department's current long-term projections indicate that retail 
food price inflation will gradually moderate over the next several 
years. Continued expansion of biofuels production will likely maintain 
corn and soybean prices at historically high levels and livestock 
producers will adjust to the increase in feed costs by reducing 
production, leading to higher retail prices for beef and pork in the 
longer term. In contrast, future upward movements in retail dairy 
product prices may be limited following the strong increase in 2007. In 
addition, global agricultural production is expected to rebound, 
especially for wheat, relieving some of the pressure on retail food 
prices for cereal and bakery products. Of course, future increases in 
retail food prices depend heavily on energy prices and other food 
marketing costs.
    Mr. Chairman, this concludes my statement. I will be glad to answer 
any questions the Committee may have.
                                 ______
                                 
    Chairman Miller. Thank you.
    Ms. Houston?

  STATEMENT OF KATE HOUSTON, DEPUTY UNDER SECRETARY FOR FOOD, 
NUTRITION AND CONSUMER SERVICES, U.S. DEPARTMENT OF AGRICULTURE

    Ms. Houston. Thank you, Mr. Chairman and members of the 
committee. I appreciate the opportunity to join today's 
important discussion about the impact of rising food costs on 
federal child nutrition programs.
    The child nutrition programs provide nutritional assistance 
to children in schools, child-care settings, as well as summer 
activities sites. They strengthen our country by safeguarding 
the health and well-being of the nation's children.
    Federal support is critical to the success of these 
programs. This administration has continually demonstrated a 
strong commitment. For fiscal year 2009, the president has 
requested $14.5 billion for child nutrition programs.
    The school meal programs are the cornerstone of the child 
nutrition programs. Each day, the National School Lunch and 
Breakfast Programs serve more than 31 million school meals, 
designed to meet the dietary guidelines.
    Today I would like to briefly describe how USDA provides 
federal support for these programs.
    The meals programs are financed through a variety of 
revenue streams, which include federal cash reimbursements and 
commodity donations, student payments for paid and reduced-
price meals, revenue from a la carte sales, state and in some 
cases local funding.
    Federal reimbursements are an important source of support, 
contributing to just over half of the total resources available 
to school food authorities.
    Schools receive cash reimbursements on a per-meal basis. 
Reimbursements are established by law, and these payments are 
adjusted annually to reflect changes in food and labor costs 
based on the Food Away From Home series of the Consumer Price 
Index.
    The cash reimbursement rates for the school year 2009 were 
published this week in the Federal Register. The adjusted 
reimbursement rates for schools and child-care institutions 
will reflect a 4.272 percent increase over the preceding school 
year.
    Most schools with a relatively high proportion of low-
income students will receive an additional 10 cents or $2.59 
for each free meal served, an additional 7 cents or $1.68 for 
each free breakfast served in the upcoming school year.
    In addition to cash reimbursements, schools participating 
in the School Lunch Program receive USDA-donated food for each 
lunch served. On the average day, the commodity entitlement 
contributes approximately 15 to 20 percent of the food served 
in the school lunch line. The value of donated commodities to 
be provided in 2009 is 20.75 cents per meal. This is an 11 
percent increase over the last school year.
    In total, these adjustments will add another $450 million 
to the cash reimbursements and commodity entitlements for 
school year 2009. That is including our projected increase in 
participation for school year 2009.
    While the annual adjustments in the cash reimbursements and 
commodity entitlements help schools mitigate the effects of 
rising costs over time, we will hear today how near-term 
increases in food costs are creating challenges for many 
schools and other program providers.
    It is important to note, however, that food costs are just 
one part of the total picture. They account for well under half 
of all the food service operational costs.
    Like families at home, schools face a real challenge in 
providing quality meals on a tight budget. Now more than ever 
local program operators must examine opportunities to 
effectively manage resources and balance operating costs with 
revenue. USDA is committed to assist schools with these 
efforts.
    For example, we help schools to maximize use of the federal 
commodity entitlement. USDA's donated commodities allow schools 
to allocate a greater share of their cash revenues to other 
operating expenses. We also provide training and technical 
assistance in procurement and contracting practices to assist 
schools in obtaining quality products and services at the 
lowest possible unit cost.
    As schools seek to mitigate rising food costs, it is 
critical that program operators maintain the nutritional 
quality of the meals made available to children. FNS recently 
released a fact sheet providing practical suggestions for 
strategies that may be helpful in controlling costs without 
compromising nutrition.
    School districts might also explore opportunities to 
increase revenues by examining the amounts of charges for paid 
meals and a la carte items and implementing marketing 
strategies to increase meal service participation. Schools 
establish these prices and can make adjustments as necessary to 
ensure that prices reflect the value of meals and other foods 
sold and contribute appropriately to the bottom line of food 
service operations.
    I will end with a little bit of good news. Schools will 
soon benefit from additional commodity resources provided in 
the 2008 farm bill. The new law incrementally increases the 
amounts of resources USDA will obligate for the purchase of 
fruit, vegetables and nuts from $393 million in 2009 up to $406 
million in 2012 and each year thereafter. We anticipate a 
significant portion of these additional resources will be 
directed toward schools.
    Mr. Chairman, the USDA recognizes that rising food costs 
challenge the food security and dietary quality of low-income 
individuals and households. At times when people are facing 
economic challenges, our programs are available to provide 
nutrition assistance, and the school meals programs are a 
critical component of the nation's nutrition safety net.
    The USDA is committed to continue our work with our state 
and local partners for the effective and efficient operation of 
child nutrition programs. We want to ensure that our children 
have access to healthy meals.
    I appreciate the opportunity to testify and look forward to 
any questions you may have.
    [The statement of Ms. Houston follows:]

   Prepared Statement of Kate Houston, Deputy Under Secretary, Food, 
    Nutrition and Consumer Services, U.S. Department of Agriculture

    Good morning, Mr. Chairman and Members of the Committee. I am Kate 
Houston, Deputy Under Secretary for Food, Nutrition and Consumer 
Services (FNCS) at the U.S. Department of Agriculture (USDA). Thank you 
for the opportunity to join you this morning to discuss the impact of 
rising food costs on Federal Child Nutrition Programs.
    USDA's Food and Nutrition Services (FNS) is responsible for 
administering 15 Federal nutrition assistance programs, which serve as 
the Nation's first line of defense against hunger and reach one in five 
Americans every year. At times when people are facing economic 
challenges, our programs are there to provide individuals and 
households with nutrition assistance. The Child Nutrition Programs play 
a vital role in the Federal nutrition safety net.
    This Administration continues to demonstrate strong commitment to 
the nutrition assistance programs. Since 2001, funding for the 
nutrition assistance programs increased more than 76 percent to $60.1 
billion in fiscal year 2008, and accounts for over half of USDA's 
annual budget. In fiscal year 2009, the President's budget requested 
$14.5 billion for the Child Nutrition Programs.
    The school meals programs are the cornerstone of our Child 
Nutrition Programs. Each school day, the National School Lunch Program 
(NSLP) and School Breakfast Program (SBP) serve more than 31 million 
school children of all economic backgrounds with well-balanced, healthy 
meals designed to meet the Dietary Guidelines for Americans. The school 
meals programs strengthen our country by safeguarding the health and 
well-being of the Nation's children.
    The school meals programs are largely financed through Federal cash 
reimbursements and commodity donations. Federal assistance for school 
meals is an important source of revenue, but is not intended to be the 
only source of such support to schools. Federal assistance constitutes 
just over half of the revenue received by school food authorities. 
Student payments for paid and reduced price meals, revenues from a la 
carte sales, and State and local funding provide the balance of funds.
    In the current environment, the challenge facing school meal 
service is to ensure that all of these resources are being used to 
their fullest potential to support the service of healthy school meals. 
We have, and will continue to, assist schools to make the most 
effective use of the full range of available resources. We work with 
State and school food service authorities to promote the most effective 
use of Federal commodity dollars. Our commodity support allows schools 
to take advantage of the Federal government's large volume purchasing 
power, often allowing the procurement of commodities at a lower unit 
cost than if a school were purchasing product on its own. We also 
provide training and technical assistance in procurement and effective 
contracting practices to assist schools in obtaining quality products 
and services at the lowest cost.
    While much of today's discussion may focus on the Federal support 
for school meals--and I will now describe how the Federal reimbursement 
process works--it is important to keep in mind that this is only one of 
the resources available for supporting the school meal service.
    Schools receive reimbursements on a per meal basis. School meal 
reimbursements are established by law, and as required by law, the 
payments are adjusted each year to reflect changes in food and labor 
costs based on the Food Away From Home series of the Consumer Price 
Index for All Urban Consumers (CPI-U). The CPI-U is a measure of the 
average change over time in the prices of consumer items--goods and 
services that people buy for day to-day living, based on data on the 
prices of thousands of items collected by the Bureau of Labor 
Statistics. The CPI-U is the accepted index used by a number of 
government programs to adjust the value of payments they provide to 
reflect the real cost of goods and services. The Food Away From Home 
series reflects changes in the cost of commercial meal service and is 
constructed from meal pricing data, which include food and labor costs 
gathered from restaurants and other food service establishments 
including workplace cafeterias and vending machines. Annual adjustments 
in the Food Away From Home series of the CPI-U are based on a twelve 
month cycle ending in May of the current year.
    Public and nonprofit private schools and residential child care 
institutions that participate in the NSLP and SBP receive cash 
reimbursements from the USDA for each meal served at the free, reduced-
price and paid levels. The reimbursement rates or National Average 
Payments (NAPs) for lunches are adjusted annually pursuant to section 4 
and section 11 of the Richard B. Russell National School Lunch Act. The 
rates for breakfasts are adjusted annually pursuant to section 4 of the 
Child Nutrition Act of 1966. The National School Lunch Act established 
a minimum reimbursement rate of 10.5 cents for all lunches served to 
children as part of the NSLP in 1981. The rate is adjusted annually 
using the CPI-U for Food Away From Home as prescribed by law, and is 23 
cents for school year 2007-2008. This base rate is the full amount for 
paid meals and a portion of the reimbursement rate for the free and 
reduced price lunches. Section 11 of the law provides additional 
funding (Special Assistance) for free and reduced price meals. The rate 
for free lunches in School Year 2007-2008 is $2.47. The NAP for each 
reduced price lunch served is 40 cents less than the reimbursement rate 
for the free lunch. The statutes also require that the annual 
adjustment of these rates, which is published in July, be rounded down 
to the nearest cent.
    The reimbursement rates vary depending on a school's economic 
circumstances and location. Schools with higher proportions of low-
income students, or greater than 60 percent of students determined to 
be eligible for free or reduced price meals, receive higher 
reimbursement rates at lunch. At breakfast, schools in which 40 percent 
or more of the students are low-income receive a higher reimbursement 
rate for meals served. Schools in Alaska and Hawaii receive a higher 
reimbursement rate because of higher cost of living.
    The NAPs for the upcoming school year, July 1, 2008 to June 30, 
2009, were published in the Federal Register on July 7, 2008. The 
reimbursement rates for schools and residential child care institutions 
for SY 2009 (July 1, 2008 through June 30, 2009) will reflect a 4.272 
percent increase in the CPI-U Food Away from Home during the 12-month 
period May 2007 to May 2008. Most schools with a relatively high 
proportion of low-income students will receive $2.59 for each free 
lunch served and $1.68 for each free breakfast served in school year 
2009 compared to $2.49 for each free lunch and $1.61 for each free 
breakfast served in school year 2008.
    Assuming schools serve a comparable number of school meals in the 
2009 school year as were served in 2008, about $400 million in 
additional reimbursements will be distributed. USDA's budget 
projections for 2009 reflect this increase in reimbursement as well as 
expected growth in program participation.
    In addition to cash reimbursements, schools participating in the 
NSLP receive a USDA commodity entitlement for each lunch served. The 
value of the commodity entitlement that will be provided in school year 
2009 is 20.75 cents per meal, an 11 percent increase compared to 18.75 
cents in school year 2008. On an average day, the commodity entitlement 
contributes approximately 15 to 20 percent of the product served on the 
school lunch line. The remaining 80 to 85 percent is purchased from 
commercial markets using the cash assistance provided by USDA, funds 
provided by State and local governments, children's payments for 
reduced price and paid lunches, proceeds from vending machines, 
catering activities and other funds earned by or provided to the school 
food service.
    Recent data from a USDA study released in April 2008 indicate that 
over time combined Federal cash and commodity reimbursements have kept 
pace with costs accrued by school food service for the production of 
school meals. According to the study, on average, Federal 
reimbursements more than cover the costs incurred by school food 
service to produce school lunches. The annual adjustments in the cash 
and commodity reimbursement rates help schools deal with rising costs 
over time; however, near-term cost increases can be challenging to 
schools.
    To address financial pressures resulting from higher costs, 
individual school districts make a number of decisions that influence 
the cost of operating the school meals programs. For example, schools 
may choose to examine procurement practices and other opportunities to 
maximize use of available resources, and to gain greater administrative 
efficiencies in their food service operations.
    Decisions by school districts also affect their ability to balance 
costs with revenue. One facet schools may choose to examine is the 
amount charged for a paid meal. According to the most recent available 
research data from the USDA School Lunch and Breakfast Cost Study II, 
on average, the combination of reimbursements and student charges for 
paid meals equals only 82 percent of the reimbursement that schools 
receive to support the service of a free meal. This suggests that in 
some schools, Federal reimbursement for meals served to low income 
students are effectively subsidizing meals served to higher income 
students. Another area schools may choose to review is their charges 
for a la carte items. Schools establish these prices and can make 
adjustments as necessary to ensure that a la carte contributes 
appropriately to the cost of the food service operations.
    USDA supports schools with guidance and training to assist them in 
responding to tight budgets and rising costs without compromising the 
nutritional quality of school meals. FNS recently released ``Meeting 
the Challenge of Rising Food Costs,'' a fact sheet providing practical 
suggestions for strategies that may be helpful in controlling costs. 
This fact sheet also contains links to other financial management 
resources which may be helpful to schools.
    Furthermore, schools will benefit from new funding provided in the 
Farm Bill. The Farm Bill increased the amount of funds for purchases of 
fruits, vegetables, and nuts from $200 million in FY 2007 to $390 
million in FY 2008, $393 million in 2009, $399 million in 2010, $403 
million in 2012, and $406 million each year thereafter. A significant 
portion of the additional purchases of these products will be directed 
to schools, with the remaining funds used for other domestic nutrition 
assistance programs.
    In conclusion, I want to reiterate USDA's commitment to help ensure 
that no one in America goes hungry. We recognize that our nutrition 
assistance programs, especially the NSLP, are critical to ensuring our 
children get a good healthy meal. State and local agencies play a vital 
role in ensuring the effective and efficient preparation of nutritious 
school meals, the healthier alternative, for our children. We will 
continue to work with our State partners and local school districts to 
identify creative ways to maximize their resources. I appreciate the 
opportunity to testify before the Committee today and would be happy to 
answer any questions.
                                 ______
                                 
    Chairman Miller. Thank you.
    Mr. Faber?

 STATEMENT OF SCOTT FABER, VICE PRESIDENT FOR FEDERAL AFFAIRS, 
               GROCERY MANUFACTURERS ASSOCIATION

    Mr. Faber. Thank you, Mr. Chairman.
    As we have already heard, food prices are rising at twice 
the rate of inflation, or the fastest level in almost two 
decades. And there are many factors contributing to the 
increased price of commodities and ultimately the increased 
price of food, including poor weather, export restrictions put 
in place by other nations, rising demand for food globally, 
especially in places like China and India, the weak dollar, 
higher energy prices certainly a factor, and changes in the 
commodities markets.
    But the most significant new factor since 2006 and the only 
factor affecting food and feed prices that is under the control 
of the Congress is the significant and sudden increase in food-
to-fuel production. This year, corn ethanol production will 
divert roughly one-third of the U.S. corn crop, up from 24 
percent in 2007.
    And the rapid expansion of corn ethanol production just in 
the last few years is the dominant factor in the 200 percent 
increase in corn prices since the 2005 crop year. Experts, 
including former USDA chief economist Keith Collins, estimate 
that ethanol production is responsible for as much as 60 
percent of the increase in corn prices between the 2006 and 
2008 crop years.
    And this expansion not only impacts the price of corn, but 
also creates a competition for land that increases the price of 
other commodities, including soybeans, ultimately vegetable 
oils. And I am sorry to say this problem is not going to get 
better; it is going to get significantly worse in the coming 
years.
    As food-to-fuel production increases in response to 
recently enacted federal mandates and existing subsidies and 
more corn and more vegetable oil are diverted to our fuel 
supplies, food prices will continue to increase. In the next 
few years, roughly 40 percent of our corn crop and about 30 
percent of our vegetable oils will be diverted to our fuel 
supplies to comply with recently enacted congressional 
mandates.
    And experts predict that annual food inflation will average 
9 percent, up from 6 percent this year, between 2008 and 2012, 
as the impact of rising commodity prices are slowly reflected 
in retail food prices. In particular, the price of milk, meat 
and eggs will rise dramatically in response to higher feed 
prices and in response to reductions in herd size.
    Unfortunately, this significant increase in food-to-fuel 
production has done very little to displace gasoline. Overall 
ethanol production in 2007 displaced less than 4 percent of the 
nation's gasoline supplies when energy values are considered.
    And we think that freezing these food-to-fuel mandates and 
revisiting these subsidies to address runaway food inflation 
and to address some new environmental concerns that have been 
raised would certainly not increase gasoline prices. In fact, 
failing to freeze these mandates could actually increase 
gasoline prices, as the cost of producing ethanol increases in 
response to high corn prices.
    One problem with these mandates, Mr. Chairman, is that 
ethanol takes up the same share of the corn crop regardless of 
supply. So, in other words, ethanol is not only eating more of 
the corn crop, ethanol gets to eat first.
    And this year serves as a perfect example of that problem. 
The wet spring and flooding have reduced expected corn yields 
from roughly 12 billion bushels to roughly 11 billion bushels. 
But because of our federal food-to-fuel mandates, ethanol will 
still use 4 billion bushels, forcing food and feed to compete 
for the balance, driving up food prices.
    And this problem is exacerbated by the fact that commodity 
stocks are at their second-lowest level in 49 years.
    Let me just conclude by reiterating that many factors are 
contributing to high food prices, including dramatic increases 
in global demand and the rising cost of energy. Food-to-fuel 
production is certainly not the only culprit in runaway food 
inflation, but it is precisely because of these other factors 
that we would revisit policies that artificially and needlessly 
increase the price of food.
    And I urge members of this committee to work with members 
of the Committee on Energy and Commerce and the Committee on 
Ways and Means to consider ways to freeze and perhaps re-
evaluate our food-to-fuel mandates, to lift tariffs on imported 
biofuels, especially biofuels that hold enormous promise to 
meet some of our energy needs without pitting our energy needs 
against our hunger and environmental needs, and to reform our 
tax credits to promote the development of these second-
generation or cellulosic and advanced biofuels.
    And, again, let me just reiterate that we certainly support 
biofuels, we certainly see a place for biofuels in our fuel 
mix. But we think it is critically important that our biofuels 
policy doesn't pit our energy needs against the needs of the 
hungry and the environment.
    Thank you, Mr. Chairman.
    [The statement of Mr. Faber follows:]

Prepared Statement of Scott Faber, Vice President for Federal Affairs, 
                   Grocery Manufacturers Association

    Thank you for the opportunity to testify on the rising cost of food 
and its impact on federal child nutrition programs. The Grocery 
Manufacturers Association strongly supports child nutrition programs, 
such as the Women, Infants and Children Program and the National School 
Lunch Program, and recognizes the strain that runaway food inflation 
places on their successful implementation.
    In general, there are seven factors contributing to the sharp 
increase in US and global food prices: poor weather, export 
restrictions, rising demand for food globally, the weak dollar, higher 
energy prices, and changes in commodities markets. In particular, 
strong foreign economic growth has increased demand for US exports and 
contributed to high grain and oilseed prices. Between 2003 and 2007, 
annual average real GDP increased by 4.6 percent, compared with 3.2 
percent in the prior five years. In emerging and developing economies, 
annual average real GDP increased by 7.3 percent, compared with 4.1 
percent for the prior five years.\1\ As households improve their 
incomes and purchasing power, they shift from traditional staples to 
high-value foods, such as meat and dairy products.\2\ In addition, many 
nations have placed limits on food exports to manage domestic food 
inflation, pushing international market prices higher than supply and 
demand conditions would otherwise dictate.\3\
    However, the most significant new factor and the only factor 
affecting food and feed prices that is under the control of the 
Congress, is the sudden and significant increase in food-to-fuel 
production. I have attached analyses by the World Bank,\4\ IMF,\5\ UN 
FAO,\6\ CRS,\7\ USDA-ERS,\8\ IFPRI,\9\ Oxfam\10\ and by former USDA 
Chief Economist Keith Collins\11\ which document the combination of 
factors contributing to US and global food prices and the significant 
role of food-to-fuel production. In general, the rapid expansion of 
corn ethanol and bio-diesel production has increased demand for corn 
and vegetable oil, increased the price of products which use corn and 
vegetable oil as ingredients, and increased the price of other crops 
that compete with corn and soybeans for land.
    Commodity prices are rising at dramatic rates. Since the 2005-2006 
crop year, farm-level corn prices have increased more than 200 percent, 
and farm-level soybean prices have increased more than 135 percent.\12\ 
Although there are many factors contributing to increases in commodity 
prices, the recent surge in ethanol production is one of the most 
significant factors. Between 2006 and 2008, US corn ethanol production 
accounted for 75 percent of the growth in global demand for coarse 
grain and 50 percent of the growth in demand for all grains.\13\ 
Collins estimates that corn ethanol could be responsible for as much as 
60 percent of the expected increase in corn prices between the 2006 and 
2008 crop years.\14\ As Collins notes, ``the increase in corn demand 
due to ethanol is rising faster than growth in corn yields per acre. So 
long as that situation continues, corn will have to attract acreage 
from other crops to meet its expanding demand. This shift will mean 
higher prices for all crops that compete, directly or indirectly, for 
acreage with corn.'' \15\


    Food prices are now rising at twice the overall rate of inflation. 
Because the price of basic commodities has dramatically increased, 
domestic food prices rose by 4.9 percent during 2007--twice as fast as 
inflation and the largest increase in 17 years. Food prices for the 
previous three months have increased at a seasonally adjusted 
annualized rate of 6.3 percent, and studies predict that annual food 
price inflation will average 9 percent between 2008 and 2012 as the 
impact of rising commodity prices are slowly reflected in retail 
prices.\16\ Although there are many factors contributing to food price 
inflation, the rising cost of commodities--driven in large measure by 
growing food-to-fuel production--is expected to cause food prices to 
rise 23 to 35 percent faster than historical increases in food 
prices.\17\ In particular, the price of animal products will continue 
to rise dramatically in response to higher feed prices.\18\ Between May 
2005 and May 2008, food-to-fuel production contributed to increases in 
the costs of basic staples like eggs (62.8 percent), whole milk (17.2 
percent), and whole chicken (13.5 percent).\19\ The price of these 
products is particularly sensitive to the rising cost of feed grains.
    Rising food prices fall most heavily on the poor. These price 
increases fall most heavily on the poorest 20 percent of Americans who 
spend roughly one-third of their after-tax income on food and on the 
global poor who spend as much as 70 percent of their income on food. 
Rising commodity prices have pushed global food prices up 83 percent 
over the last three years\20\--and by 57 percent in the last year--
pushing 50 million people into poverty in 2007 alone, according to the 
UN FAO. In combination, rising prices and declining commodity stocks 
have forced global food aid programs to ration food, and have 
contributed to food riots and protests in more than 30 countries. 
Rising food inflation in the developing world is not merely a food 
security issue, but is a national security issue. The World Bank warns 
that 33 nations are at risk of social unrest because of the rising 
price of food.\21\
    Rising food prices pose significant budgetary challenges. Although 
potential outlays are difficult to estimate, government spending will 
increase significantly as food prices rise. Many federal programs 
linked entirely or in part to the Consumer Price Index (CPI), including 
anti-hunger assistance programs and child nutrition programs. The CPI 
is often used to adjust federal payments, determine program 
eligibility, and to provide cost-of-living adjustments to millions of 
workers. Overall, the CPI affects the income of about 80 million 
people, including 51.6 million Social Security beneficiaries, 21.3 
million food stamp recipients, about 4.6 million military and civil 
service retirees or survivors, and more than 2 million workers impacted 
by collective bargaining agreements. In particular, changes in the CPI 
affect the cost of school lunches for 28.4 million children.\22\ Rising 
food prices will impact federal outlays in three ways: by automatically 
increasing federal expenditures on programs linked all or in part to 
the CPI; by reducing the number of households and students that can be 
served by programs, such as the WIC program; and by forcing 
appropriators to reduce discretionary spending for other programs to 
address shortfalls.
    Rising feed prices are causing severe economic harm for livestock 
producers. Although some crop farmers have benefited from high 
commodity prices, many more livestock producers are facing 
unprecedented losses. The higher costs of corn and soybean meal \23\ 
have translated directly into higher feed costs for all livestock 
producers.\24\ Feed costs climbed by over $15 billion between 2005 and 
2008 due to higher prices for corn and other grains.\25\ Moreover, feed 
costs will continue to remain well above historic levels through 2017 
as food-to-fuel mandates are fully implemented.\26\ In 2008-09, for 
example, food-to-fuel mandates are estimated to increase the cost of 
livestock production by as much as $17.7 billion.\27\ Ultimately, the 
increased cost of feed will be passed on to consumers in the form of 
higher food prices. As feed costs rise, meat and poultry production 
will decline and many livestock farmers will be forced out of business. 
Producers at greatest risk of failure are poultry, dairy, hog and beef 
producers who do not produce their own feed grains.\28\
    Historically low commodity stocks pose severe economic 
consequences. Global stocks of several major commodities are at or near 
historic lows--particularly when measured as a share of total 
usage.\29\ For example, global end-of-year stocks for coarse grains and 
wheat are projected to drop by mid-2008 to the lowest levels since 
1977, while ending stocks of total grains will fall to the lowest 
levels since 1981. In particular, a rapid increase in the production of 
ethanol combined with a decline in corn plantings will likely result in 
the second lowest level of corn stocks relative to consumption in 49 
years. Increasing the use of corn for ethanol by 33 percent in 2008 
will contribute to a 40 percent reduction in the corn inventory.\30\ 
For most commodities, annual prices tend to have a strong negative 
correlation with the ending stocks-to-use ratio.\31\ Reduced yields in 
2008 caused by a wet spring and flooding combined with surging ethanol 
production and low commodity stocks are already resulting in dramatic 
increases in crop prices.
    Food prices will continue to rise as more and more corn and soybean 
oil are diverted to our fuel supplies. Unless the Congress and the 
Administration act this year to revise federal food-to-fuel mandates, 
commodity prices will continue to rise as more and more food is 
diverted to our fuel supplies. In 2008, roughly one-third of U.S. corn 
supplies will be diverted to produce fuel. In the coming years, 40 
percent or more of the U.S. corn crop and as much as 30 percent of U.S. 
vegetable oils will be diverted from our food supplies to our fuel 
supplies. Because commodity prices will remain high in response to 
these mandates, food prices are expected to increase by 9 percent 
annually between 2008 and 2012.\32\


    Unfortunately, food-to-fuel policies have no impact on gasoline 
prices. Because ethanol displaces a small fraction of the US gasoline 
supply and a tiny fraction of global crude supplies, food-to-fuel 
mandates will have no impact on gasoline prices. Overall, ethanol 
production in 2007 displaced less than 4 percent of the nation's 
gasoline supplies in 2007, when relative energy values are considered. 
Consequently, freezing the mandate at the levels blended in 2007--that 
is, reducing the mandate from 9 and 10.5 billion gallons to levels 
blended into fuel supplies in 2007--would not increase gasoline prices. 
In fact, failure to revise food-to-fuel mandates could marginally 
increase gasoline prices under some scenarios. Eventually, rising 
demand for corn to produce ethanol will increase the cost of producing 
ethanol and result in higher prices at the pump.\33\
    And, food-to-fuel policies harm the environment. Diverting food 
crops to our fuel supplies has artificially increased the price of 
commodities, accelerating the conversion of pasture and forest lands to 
crop production at home and around the globe. Current and expected 
conversion of pasture and forest lands will release carbon into the 
atmosphere and reduce the availability of carbon ``sinks'' that help 
sequester carbon. In addition, increased production of row crops of 
uncultivated land has increased water pollution, compounded water 
shortages, and contributed to the loss of habitat for wildlife. In 
particular, increased fertilizer use associated with expanded crop 
production has increased the amount of nitrogen and phosphorous being 
washed into rivers and bays, including the Chesapeake Bay and the Gulf 
of Mexico, and will increase ground-level ozone in some regions. 
Increasing the use of distiller's grain--a byproduct of ethanol 
production that is fed to animals but has less nutritional value than 
feed--increases the amount of phosphorous reaching waterways.
    Although this Committee does not have jurisdiction over food-to-
fuel mandates, subsidies, and tariffs, I urge you to work with the 
Committee on Energy and Commerce and the Committee on Ways and Means to 
revisit and restructure our food-to-fuel policies to accelerate the 
development of fuels that do not pit our energy needs against the needs 
of the hungry and the environment.
    Congress should freeze food-to-fuel mandates. In light of crop 
reports and perilously low commodity stocks, Congress and the 
Administration should act now to reduce the federal food-to-fuel 
mandate for 2008 and 2009 to production levels for 2007 and should 
revisit and revise food-to-fuel mandates, subsidies and tariffs to 
reflect changing economic conditions and new questions regarding the 
economic and environmental costs of fuels made from food crops. 
Freezing the mandate would result in immediate reductions in the price 
of corn. A recent study by FAPRI estimated that implementation of the 
RFS increased corn prices by 19 percent.\34\ A separate study by IFPRI 
concluded that a freeze of biofuel production at 2007 levels would 
reduce global corn prices.\35\ These studies do not take into account 
significant declines in yields in 2008, which are amplifying the impact 
of increased ethanol production on corn prices.
    Congress should accelerate the development of sustainable bio-
fuels. Congress should revisit and reform food-to-fuel mandate 
schedules, subsidies and tariffs to gradually reduce our reliance on 
food as an energy feedstock, and to accelerate the development of bio-
fuels that do not pit our energy needs against the needs of the hungry 
or the environment. In particular, Congress should accelerate the 
development of cellulosic and advanced bio-fuels derived from fuel 
feedstocks that do not increase food or fiber prices and that and 
improve the environment. To accelerate the development of such fuels, 
which could displace far more gasoline than corn ethanol, Congress 
should eliminate the 54 cent tariff on imported bio-fuels and should 
consider reforms to federal tax credits to reward the production of 
sustainable bio-fuels.
    Congress should accelerate global agricultural development. 
Congress should take steps to expand hunger assistance programs to help 
address the impact of food inflation at home and abroad. What's more, 
Congress should also provide new funds to increase the productivity and 
sustainability of agricultural lands in the developing world. Between 
2003 and 2007, global usage of coarse grains like corn grew by 3.4 
percent. At the same time, annual growth in agricultural productivity 
is slowing. Between 1970 and 1990, production rose by an average of 2.2 
percent per year. Since 1990, the growth rate has declined to about 1.3 
percent. Projections for US and world agriculture see the rate 
declining to 1.2 percent per year between 2009 and 2017.\36\
    In conclusion, we urge Congress to revisit the food-to-fuel 
mandates in light of dramatic increases in food prices and new 
questions about the environmental costs of fuels derived from food 
crops. Although there are many factors contributing to record food 
inflation--including increasing global demand, export restrictions, 
poor weather, commodity speculation, and higher energy prices--a 
significant new factor and the only factor affecting food and feed 
prices that is under the control of Congress is food-to-fuel mandates 
and subsidies diverting food into our fuel supplies.

                                ENDNOTES

    \1\ Collins, Keith. ``The Role of Biofuels and Other Factors in 
Increasing Farm and Food Prices,'' prepared for Kraft Global Food, June 
2008.
    \2\ CRS, High Agricultural Prices: What are the Issues?, May 6, 
2008, at 17 (hereinafter ``CRS'')
    \3\ CRS, at 21
    \4\ ``Rising Food Prices: Policy Options and World Bank Response,'' 
World Bank, April 2008.
    \5\ International Monetary Fund, ``World Economic Outlook, 
Globalization and Inequality,'' October 2007.
    \6\ UN FAO, Soaring Food Prices: Facts, Perspectives, Impacts and 
Required Actions, June 2008.
    \7\ CRS, High Agricultural Prices: What are the Issues?, May 6, 
2008.
    \8\ USDA, ERS, Global Agricultural Supply and Demand: Factors 
Contributing to The Recent Increase in Food Commodity Prices, May 2008.
    \9\ Von Braun, Joachim. ``Biofuels, International Food Prices, and 
the Poor.'' International Food Policy Research Institute (IFPRI). June 
12, 2008.
    \10\ ``Another Inconvenient Truth: How biofuel policies are 
deepening poverty and accelerating climate change,'' Oxfam 
International, June 26, 2008.
    \11\ Collins, Keith. ``The Role of Biofuels and Other Factors in 
Increasing Farm and Food Prices,'' prepared for Kraft Global Food, June 
2008. (Hereinafter ``Collins'')
    \12\ USDA, World Agricultural Supply and Demand Estimates, June 
2008.
    \13\ Id.
    \14\ Collins. Collins finds that ethanol could account for 60 
percent of the expected increase in corn prices between 2006/07 and 
2008/09 when market demand and supply are inelastic with respect to 
price--that is, a period when stocks are very low, feed use is slow to 
respond, export demand is strong due to foreign agricultural policies, 
and acreage is very constrained.
    \15\ Id.
    \16\ Advanced Economic Solutions, Rising Commodity Prices and their 
Impact on US Food Inflation, June 2008.
    \17\ Collins. If food-to-fuel production accounts for 60 percent of 
the expected increased in feed grain and oilseed product costs between 
2006/07 and 2008/09, and these increases are passed on to retail 
consumers, these increases would increase baseline US expenditures on 
food by 1.8 percent over a 2-3 year period. This increase is 
significant in light of the fact that long-term annual average food 
inflation is about 2.5 percent. Thus, the increase in retail food 
prices due to biofuels is estimated to be 23-35 percent above the 
normal increase in food prices that would occur over 2-3 years.
    \18\ Elam, Thomas, ``Biofuels Support Policy Costs to the U.S. 
Economy,'' FarmEcon LLC, March 24, 2008 (Hereinafter ``Elam'')
    \19\ Consumer Price Index--Average Price Data (retrieved for most 
requested statistics), Bureau of Labor Statistics, available at http://
www.bls.gov/data/home.htm.
    \20\ Bob Davis and Douglas Belkin, Food Inflation, Riots Spark 
Worries for World Leaders,'' Wall Street Journal, April 14, 2008. A1.
    \21\ ``The World Food Crisis,'' New York Times, Editorial, April 
10, 2008.
    \22\ BLS, at http://www.bls.gov/dolfaq/bls--ques1.htm
    \23\ Elevated corn prices in response to increasing biofuels demand 
also contribute to the historically high prices of soybeans because 
soybean cropland must compete with corn for cropland. Indeed, the price 
of soybeans has risen even though stockpiles of soybean oil are also at 
near record levels. USDA reported that the price of soybeans per bushel 
was $6.43 in 2006/2007, but shot up to $9.00 in 2007/2008. USDA 
Projections, at 35 (Table 7). Prices of soybeans and soybean-derived 
products (e.g., soybean meal and soybean oil) are projected to increase 
and remain well over 2006/2007 levels over the long-term due to 
continued increased demand for biofuels, with even greater price 
increases likely as a result of the strengthened biofuels mandates 
enacted by Congress in 2007. USDA Projection, at 23 and 41 (Table 13).
    \24\ Food and Agricultural Policy Research Institute, 2008 U.S. 
Baseline Briefing Book (March 2008) (hereinafter ``FAPRI Report''), at 
3, available at http://www.fapri.missouri.edu/outreach/publications/
2008/FAPRI--MU--Report--03--08.pdf.
    \25\ FAPRI Report, at 60.
    \26\ FAPRI Report, at 60. See also USDA Projections, at 4, 49 and 
60. In fact, USDA acknowledges that its own projections likely 
underestimate the anticipated increases in costs of animal feed 
because, although they account for the biofuels mandates created by the 
Energy Policy Act of 2005, they do not account for the strengthening of 
those mandates by Congress in December 2007, which has added to the 
unprecedented demand for corn. USDA Projections, at 23.
    \27\ Elam at 28,
    \28\ Elam at 28. See also FAPRI Report, at 42 (suggesting that beef 
producers will experience financially difficult times in the next few 
years as they face high and rising input costs); see also FAPRI Report, 
at 50 (stating that higher feed costs have contributed to increases in 
the costs of producing milk).
    \29\ CRS, High Agricultural Prices: What are the Issues?, May 6, 
2008.
    \30\ USDA-ERS, Feed Outlook, May 13, 2008.
    \31\ CRS, High Agricultural Prices: What are the Issues?, May 6, 
2008.
    \32\ Advanced Economic Solutions, The Impact of Rising Commodity 
Prices on Food Inflation, June 2008
    \33\ Elam, Thomas, ``Biofuels Support Policy Costs to the U.S. 
Economy,'' FarmEcon LLC, March 24, 2008.
    \34\ FAPRI-MU, The Energy Independence and Security Act of 2007: 
Preliminary Evaluation of Selected Provisions, January 2008.
    \35\ Rosegrant, Biofuels and Grain Prices: Impacts and Policy 
Responses, May 5, 2008.
    \36\ USDA, ERS, Global Agricultural Supply and Demand: Factors 
Contributing to The Recent Increase in Food Commodity Prices, May 2008.
                                 ______
                                 
    [Additional submissions from Mr. Faber follow:]
    [``Global Agricultural Supply and Demand: Factors 
Contributing to the Recent Increase in Food Commodity Prices,'' 
may be accessed at the following Internet address:]

        http://www.ers.usda.gov/Publications/WRS0801/WRS0801.pdf

                                 ______
                                 
    [``Another Inconvenient Truth: How biofuel policies are 
deepening poverty and accelerating climate change,'' may be 
accessed at the following Internet address:]

         http://www.oxfam.org/policy/another-inconvenient-truth

                                 ______
                                 
    [``The Role of Biofuels and Other Factors in Increasing 
Farm and Food Prices,'' may be accessed at the following 
Internet address:]

  http://www.foodbeforefuel.org/facts/studies/role-biofuels-and-other-
                factors-increasing-farm-and-food-prices

                                 ______
                                 
    [``World Economic Outlook,'' October 2007, may be accessed 
at the following Internet address:]

       http://www.imf.org/external/pubs/ft/weo/2007/02/index.htm

                                 ______
                                 
    [``World Bank Response to rising food prices,'' may be 
accessed at the following Internet address:]

  http://siteresources.worldbank.org/NEWS/Resources/risingfoodprices--
                       backgroundnote--apr08.pdf

                                 ______
                                 
    Chairman Miller. Dr. Wilson?

   STATEMENT OF KATIE WILSON, PRESIDENT-ELECT OF THE SCHOOL 
 NUTRITION ASSOCIATION, FOOD AND NUTRITION COORDINATOR FOR THE 
                    ONALASKA SCHOOL DISTRICT

    Ms. Wilson. Good morning, Chairman Miller, members of the 
committee. I am Dr. Wilson, president-elect of the School 
Nutrition Association, and I have also been a practitioner as a 
school nutrition director in Wisconsin for over 20 years.
    Our 55,000 members serve 30 million students every day. 
And, members of this committee, Mr. Chairman, I am here to tell 
you we are struggling to make ends meet.
    While the increase in the cost of food, as you have heard 
today, is very dramatic, we also have many compounded other 
hidden expenses. Meeting the dietary guidelines for Americans, 
an important goal for the school nutrition program, has been 
difficult due to the lack of funding to purchase fresh fruits, 
vegetables and whole grains that we are expected to serve.
    The lack of uniform national nutrition standards is 
increasing the cost of our meal programs. When the same product 
is produced with different standards, it costs all of us money. 
We simply don't have the funds to continue on with this.
    Finally, we are being charged increased indirect costs, 
such as electricity, gas, water, trash removal, and, in many 
cases, we are being charged for expenses not associated with 
the school nutrition program, such as school district 
administrative salaries.
    As you have heard, USDA just announced the reimbursement 
rate for $2.57 for free meals, while in many school districts, 
the cost of preparing that meal is well over $3.
    In order to cope with these costs, 75 percent of the 
respondents of our survey reported raising the price of the 
school meals for the paying student. While that may seem like a 
viable solution, we are concerned that the working families can 
no longer afford these meals. We see it on the homefront every 
day.
    With all of these factors swirling together, it seems as if 
a perfect storm is developing.
    A few examples: Mr. Chairman, in Antioch, California, the 
cost to produce a meal is increasing from $2.27 to $2.92. The 
district will look not only to increase meal prices, it will 
also reduce its labor force.
    In San Diego, meal costs are increasing from $2.47 to 
$2.97. It will be a total of an extra $6.3 million in the 2008-
2009 year to run that program.
    The Miami-Dade County Public Schools' Food and Nutrition 
Department saw an additional $4.9 million in milk cost alone in 
the 2007-2008 school year.
    A good summation of this problem is a new school nutrition 
director from Pittsburgh, California, saying, ``My expenses 
will increase with declining revenues. Next year will be a 
tough year, and I am not sure how I will accomplish it.''
    So, Mr. Chairman, how do we deal with these crucial issues? 
Let me suggest four items to begin with.
    Number one, more frequent and realistic cost-of-living 
updates. Once a year does not reflect my monthly price 
fluctuations. Most vendors will not lock in prices for more 
than 6 months.
    Number two, cap indirect costs and give clear directions as 
to what is allowable for districts to charge the school 
nutrition programs.
    Number three, give us commodities for the School Breakfast 
Program to help to hold down food costs. We are provided 
commodities for school lunch, but not breakfast.
    And, finally, support and move forward legislation for 
national nutrition standards to control the costs we see.
    In closing, along with the food cost increases that we are 
talking about today, we must deal with complexity of issues. I 
look forward to working with you to develop an action plan to 
mitigate some of these expenses.
    Mr. Chairman, members of the committee, thank you very much 
for allowing SNA to participate in this hearing, and I would be 
pleased to answer any questions.
    [The statement of Ms. Wilson follows:]

   Prepared Statement of Katie Wilson, President-Elect of the School 
Nutrition Association, Food and Nutrition Coordinator for the Onalaska 
                            School District

    Chairman Miller, Members of the Committee, we deeply appreciate 
this hearing and the opportunity to discuss how the school nutrition 
programs are being effected by the steep increase in food prices. I am 
Katie Wilson, PhD, the President-Elect of the School Nutrition 
Association (SNA) from Onalaska, Wisconsin. I also serve as the 
Chairman of the Nutrition Standards Committee for SNA.
    When SNA testified before the Committee just a few months ago on 
the subject of nutrition standards and the beef recall, we noted the 
``USDA currently reimburses local schools $2.47 for every ``free'' 
lunch provided to a child with income below 130% of the poverty line * 
* * less than the price of a latte at the neighborhood coffee shop.'' 
Even the increase for the new school year--$2.57--which was announced 
this week, fails to meet the true cost of providing school lunches, and 
on a percentage basis is smaller than the food cost increases we are 
experiencing.
    Our 55,000 members serve 30 million students every day. We believe 
we can no longer work the magic. You can only stretch the food dollar 
so far. The increase in the cost of food we are all experiencing is 
very dramatic and compounded by several other factors:
     We are all trying very hard to respond to the obesity 
epidemic by making needed changes in the school food service menu but 
the changes are expensive. The Food and Nutrition Service has asked 
schools to develop meals that meet the 2005 Dietary Guidelines for 
Americans, but has not factored in the added cost of meeting this 
critical goal. Fresh fruits and vegetables are expensive. Whole 
grains--if they are even available--cost more than products made with 
white flour. Our members report that it is not uncommon to pay 5 to 6 
cents more for a single serving of whole grain bread over a serving of 
white bread.
     As the cost of fuel increases, many local school 
administrators are charging the school food service program more and 
more for the ``indirect expenses'' of running the school. These 
expenses include utilities such as electricity, gas, water, and trash 
removal. According to SNA's School Nutrition Operations Report: The 
State of School Nutrition 2007; 46.6% of the programs have seen an 
increase in their indirect costs.
     It goes without saying that fuel costs are also increasing 
transportation costs. In many areas, this is impacting food bills, as 
food distributors are adding surcharges to make up for additional fuel 
expenses.
     The cost of labor has also been increasing for school 
nutrition employees for several years now. Many states and school 
districts require their employees to be provided with healthcare and 
other benefits. This is great for our employees, but unfortunately 
means that the school nutrition program budget must cover the costs of 
the mandated benefits. In some places, health care costs have risen as 
much as 7-10 percent.
     The historic February 2008 beef recall, which we testified 
about, is still having an effect on school nutrition programs. Many 
programs spent money to destroy the recalled beef and order new product 
to replace it but still have not been reimbursed by USDA.
     Finally, as we mentioned at the last hearing, the lack of 
a uniform national interpretation of the Dietary Guidelines is 
increasing the cost of the meal program. The multiplicity of different 
state and local nutrition standards is driving up the cost of producing 
food products and this increase is being passed on to local school food 
programs. We simply do not have the money to pay for many different 
interpretations of the Dietary Guidelines. We urge the Congress to 
establish a uniform national standard for the Dietary Guidelines.
    A recent survey of school nutrition directors reveals even more 
about the state of school nutrition programs. SNA is still collecting 
results, as many school districts finalize their bids and menus during 
June and July. Very preliminary findings, however, show that the cost 
of preparing a school meal will jump $0.30 per meal, per day, per 
child, to a national average of $2.88. Last year there were 5 Billion 
lunches served. When you multiply 30 cents by 5 billion, the national 
impact is approximately $1.5 Billion.
    In many school districts, the cost of preparing a meal is well over 
$3.00. In order to cope with the rise in costs, districts are weighing 
a variety of options. Approximately 75% of respondents to our survey 
are raising the price of a school meal for paying students. Reducing 
the number of employees, while undesirable during difficult economic 
times is another option 62% of directors are considering. What is most 
disconcerting, though, are the 69% of directors who are dipping into 
their financial reserves. School nutrition programs keep these rainy 
day funds on hand for capital equipment purchases since equipment 
assistance is no longer provided. (Equipment assistance was eliminated 
by Congress in the early 1980s). Instead, many directors are using 
their capital improvement reserves for day-to-day operations, which 
will have a profound effect in the years ahead.
    As food costs continue to rise, we are challenged to do more with 
much less. With all of these factors swirling together, it seems as if 
a perfect storm is developing. Take a look at these examples from 
districts around the country:
     In Ponca City, Oklahoma, there is a $25,000 to $30,000 
increase in food contracts from the 2007-08 school year to the 2008-09 
school year. The district's school nutrition director noted that at the 
end of the school year, many vendors gave 30 day notices stating they 
could not meet agreements on pricing. Many other school districts echo 
similar comments from their vendors.
     This year, the growing food costs have pushed Florida's 
Polk County School District $1 million into the red. This is the 
district's biggest loss on record.
     The price of milk has increased more than 32 percent since 
2006 in the Hoover School District in Alabama. Next year, the district 
will pay $72,000 more for milk.
     Miami-Dade County Public Schools Food and Nutrition 
Department has seen a 7 cent increase in the price they pay for whole 
grain bread from the 2006-2007 school year to the 2007-2008 school 
year--representing almost a half a million dollars more they had to 
spend. During the same timeframe a case of trans fat-free margarine 
went from $12.12 to $21.96 representing an increase of over $125,000 
while a \1/2\ pint carton of milk increased from 17 cents to 26 cents--
costing the nutrition program an additional $4.9 million.
     Some school districts will stop offering universal free 
breakfasts in the fall. Next school year, the Rowan-Salisbury School 
District in North Carolina will stop offering free breakfasts to 
students at six district schools due to rising food costs. While 
students eligible for free meals will continue to receive breakfast, 
all other students must now pay. This is an unfortunate consequence, as 
there is a strong link between breakfast and improved academic 
achievement.
    Despite the challenges, school nutrition professionals are NOT 
sacrificing nutritious school meals. We are still dedicated to 
providing our students with healthy, balanced, low cost breakfasts and 
lunches. We must meet the nutrition guidelines set by the U.S. 
Department of Agriculture and many of our home states. To do so, school 
nutrition professionals nationwide are cutting budgets and looking for 
alternative items. In some cases this requires exercising a little 
creativity. For instance:
     The Wayne Township School District in Indiana cannot raise 
meal prices this year, since they raised them during the previous 
school term for the first time in 8 years. Instead, the district's 
school nutrition director is reviewing every non-food related cost, 
looking to save money on paper goods and packaging.
     To avoid raising lunch prices, Utah's Davis County School 
District is purchasing food earlier and in bulk. Buying in bulk allows 
the school district to save a considerable amount of money. In some 
places, school districts are banding together to form purchasing 
cooperatives. By joining a cooperative, school nutrition programs have 
greater buying power and can purchase items at a lower cost.
     Some nutrition programs are downgrading menu selections to 
less expensive options. For example, students in the Charlotte-
Mecklenburg schools in North Carolina will be served spaghetti in place 
of lasagna this year. In the Spring Independent School District, 
outside of Houston, Texas, baby carrots will be replaced with carrots 
cut on site.
     The Alvord Unified School District in California will 
eliminate meat and cheese from salad bars and will instead offer a 
produce bar with four cold fruit and vegetable choices and crackers as 
a supplement to students' entrees.
    I could continue. These are only a few examples of the ingenuity 
displayed by my colleagues around the country. At the end of the day, 
however, what school nutrition directors are doing to lessen the impact 
of rising costs is still not enough. Our programs need additional help 
in order to provide the highest quality, healthiest meals available to 
students each day.
    In an effort to mitigate the rapid increase in the cost of food, we 
would like to make several suggestions for your consideration:
    1. As you know, the National School Lunch Act updates the various 
reimbursements annually. Given how fast food prices are escalating, by 
the time the new rates are implemented they are out of date. SNA 
believes that the statute should be amended to require adjustments 
twice a year, or every six months.
    2. The current index formula is based on ``food away from home.'' 
The question in our mind is whether that is the correct index, or 
whether there is a more appropriate index. We would appreciate your 
guidance on that question.
    3. As I mentioned, many school districts are increasing the 
``indirect expenses'' that are being charged against the school food 
service account. For example, in many cases, the percentage of the 
lighting bill or the sanitation bill, or even the salary of the school 
administrator, being charged to us, the school food service account, is 
far out of proportion to reality. Unlike many other programs, there is 
no maximum in the statute or the regulation as to what a school can 
charge us (the food service account). The appropriations bill, each 
year, states that the money is to fund the National School Lunch and 
Breakfast Programs. In reality, however, the money is used for many 
other school expenses. It has gotten out of hand and we feel that the 
statute should require USDA to establish a maximum indirect expense 
charge and one that is based on our true cost and expense to the 
school. Such a change would greatly improve the financial integrity of 
the school meal program and allow us to improve meal quality.
    4. Finally, the School Breakfast Program still does not receive any 
USDA commodity assistance. The Lunch Program receives USDA commodities, 
but not the breakfast program. It would greatly assist our programs, 
and help us expand the breakfast program, if the Congress amended the 
statute to provide commodity assistance. Our suggestion is to provide 
ten cents (.10) per breakfast. Again, this would greatly assist us in 
trying to cope with the cost of food. Let me also note, however, that 
even though the School Lunch Program receives commodity assistance, 
it's much less than in previous years. Because of changes in the 
agriculture economy, ``bonus commodities'' have all but stopped. 
Traditionally, our ``entitlement'' commodities were supplemented by 
bonus commodities, or extra surplus commodities. That is no longer 
happening to the same extent. We hope you will take this change into 
consideration in deciding on the level of commodity assistance for 
breakfast and lunch.
    Thank you very much, Chairman Miller, for convening this important 
hearing and for allowing SNA to participate. I would be pleased to 
answer any questions.
                                 ______
                                 
    Chairman Miller. Thank you.
    Mr. Matustik?

 STATEMENT OF PAVEL N. MATUSTIK, CHIEF ADMINISTRATIVE OFFICER, 
        SANTA CLARITA VALLEY SCHOOL FOOD SERVICES AGENCY

    Mr. Matustik. Mr. Chairman, members of the committee, I am 
honored to appear before you today. And thank you for the 
invitation to address the rising cost of food and its impact on 
federal child nutrition programs.
    I will summarize my written testimony, which I have 
submitted for the record.
    My name is Pavel Matustik, and when I escaped from then-
communist Czechoslovakia 26 years ago, I didn't even dream that 
one day I would be testifying in front of this august body.
    Today I am the chief administrative officer for the Santa 
Clarita Valley School Food Services Agency. Our agency is a 
joint powers agency; in some other states, it would be called 
an intergovernmental agency. It was established by five local, 
relatively small school districts for providing school meals 
for their students.
    It shall be mentioned that before they started the JPA, 
these school districts were regularly losing together around 
$300,000 a year. Today our operation is so successful that just 
this past school year we gave back $700,000 to our members. 
This is an improvement of $1 million a year.
    Our operation in Santa Clarita has been hit with the same 
woes as the rest of the school food service industry in the 
country. The horrendous increases in the cost of fuel, energy 
and agricultural commodities are starting to have a rather 
negative impact on our bottom line. I am sure that the 
committee members are well aware of these facts, and you can 
find some of the numbers and charts in my report.
    Thanks to the slowing economy and lower tax receipts, the 
school district budgets are hit hard as well. And it will be 
hard for them to fiscally support their food service 
operations.
    The question in front of all of us is: How can you and our 
government help, and how can we help ourselves?
    Before I start asking for more funds, which would certainly 
help the child nutrition entities across the country, let me 
share with you how our organization copes with these 
challenges.
    It in my opinion that the JPA is a business model which 
should be copied all across the country. The savings could be 
enormous. The JPA immediately wins increased purchasing power, 
increased flexibility, and positive cash flow.
    It is a philosophy of our agency to fight the reverse Robin 
Hood syndrome. There is no reason, other than political, for 
school districts to charge for the paid meals less than what 
the federal government reimbursement rate is. You can see a 
chart also attached.
    Two years ago, using direct shipments from the USDA 
commodities, we started to prepare our own homemade, lower-fat, 
whole grain, fresh pizza, which we deliver daily to all our 
schools as a part of our daily five menu offerings.
    Two hundred large and small school districts in California 
created a commodity processing and procurement cooperative. 
This co-op established long-term, 2-, 3-year contracts with 
over 50 manufacturers with guaranteed pricing, which is 99 
percent better than the rest of California's schools.
    There are also ways for you, our representatives, to help 
the American school child nutrition operations without any 
additional financial obligations.
    Help eliminate no-value-added costs from our programs. The 
USDA delivers the commodities to processors or our warehouses 
for free. California charges an additional $1 per case; they 
never touch. The state receives over $1.3 million from USDA for 
food distribution. Only, from our co-op, and therefore from our 
children, the state of California is taking an additional $1 
million a year.
    USDA shall require each state to roll over unspent or 
overspent entitlement to the district responsible. The USDA has 
been working for some time now on a pilot program to allow 
districts to use the entitlement dollars for purchasing fresh, 
pre-cut produce from commercial channels. This program can 
become a great benefit to all districts. Work with the USDA to 
eliminate any remaining hurdles.
    An increase of 1 penny per serving negatively affects 
school meal programs by $54 million a year. And the costs of 
meals in California went up on average by 4 cents, or 20 
percent, from 2006-2007 levels.
    There is an obvious question which will probably anger 
every dairy farmer in America and, therefore, a sane person 
would never ask. But because I am a foreigner born and a 
canceled Czech who doesn't know any better, I will. [Laughter.]
    Why do we have to offer milk with every breakfast and every 
lunch?
    And please try to research a possibility of national 
science-based nutrition standards. As Katie mentioned, it would 
save a huge amount of dollars for all of us.
    In conclusion, I would like to reiterate that there is a 
need to find a unifying solution to the impact our schools feel 
because of these fairly sudden increases in food and energy 
costs. I believe that a long-term solution can only be found if 
school districts and Congress consider some of the proposals I 
have spoken about. Let's remember that every dollar saved from 
the general fund can go back to the classrooms.
    Mr. Chairman, Mr. McKeon, thank you for this opportunity to 
testify.
    [The statement of Mr. Matustik follows:]

  Prepared Statement of Pavel N. Matustik, CAO, Santa Clarita Valley 
                      School Food Services Agency

    My name is Pavel N. Matustik and I am the Chief Administrative 
Officer for the Santa Clarita Valley School Food Services Agency 
(SCVSFSA.) Our organization is a Joint Powers Agency (in some other 
states it would be called an Intergovernmental Agency) established by 
five local (relatively small) school districts for providing school 
meals to their students. It is important to mention that before they 
started the JPA these five school districts were regularly supporting 
their food service operation from their general funds. The districts 
joined together and borrowed over $5.5 million to start the Agency. 
Today our operation is so successful that we have repaid $4.8 million 
to the member districts--just this past school year (07/08) we paid 
back $700,000 to our members.
    Presently we provide food for 42 schools with an enrollment of over 
30,000 students. Some of our schools have attendance over 1,000 
students; others have as few as 250 pupils. We serve about 15,000 
lunches and 4,000 breakfasts a day. In the elementary schools we offer 
5 menu choices daily, and in secondary schools there are a minimum of 
ten choices. We have salad bars in all of our schools. Our JPA employs 
172 people and the majority (about 75%) are part time workers. The 
Agency reports to the Board of Directors--each member district has one 
representative on the Board. This is usually a superintendent or the 
business manager.
    It needs to be noted, that the school food service operation is the 
only public school segment that is expected to be fiscally self-
sufficient and operate without any help from the districts' general 
funds. It is the only school district's department, that is expected to 
be run as a business. As one of my mentors, Mr. De Burgh, likes to say: 
I don't know a school food administrator fired for serving a fat-
burger, but I certainly know many who lost their job because of their 
negative cash flow * * *
    Our operation in Santa Clarita has been hit with the same woes as 
the rest of the school food service industry in the country: the 
horrendous increases in the cost of fuel, energy and agricultural 
commodities are starting to have a rather negative impact on our 
``bottom line''. I'm sure that the committee members are well aware of 
these facts and you can find some of the numbers and charts in the 
appendix. (Appendix I)
    As I previously mentioned (and every other presenter today has the 
same message) the costs of labor, statutory benefits, energy and 
agricultural commodities are rising faster than the core inflation. The 
other incoming conundrum is the fact that thanks to the slowing economy 
and lower tax receipts the school district budgets are hit hard as well 
and it will be hard for them to fiscally support their food service 
operation. The question in front of all of us is: How can you and our 
government help, and how can we help ourselves?
    Before I start asking for more funds, which would certainly help 
the child nutrition entities across the country, let me share with you 
how our organization copes with these challenges.
    1. Five small local school districts established a new joint 
governmental entity with one goal: to provide affordable nutritional 
meals to their students without any encroachment on their general 
funds. The JPA immediately gained:
    Increased purchasing power;
    Fundamentally sound and knowledgeable administration;
    Ability to train staff and increase the employees' professional 
knowledge and attitude;
    Eliminated any encroachments on districts' general funds. 
Consequently, the JPA is able to return some of the funds back to the 
districts.
    It is my opinion that this is a business model, which should be 
copied all across the country--the savings for our education entities 
would be enormous.
    2. It was always a philosophy of our organization to fight the 
``reverse Robin Hood'' syndrome. There is no reason (other than 
political) for school district charge for the paid meals less than what 
the Federal Government sees as a necessary reimbursement rate. 
(Appendix II)
    3. A well-run USDA commodity program can represent as much as 20% 
of any school food service operation's food budget. Thanks to your 
guidance and the USDA's leadership the commodity programs today are a 
huge advantage to school systems that know how to use them. The 
national processing agreements, direct diversion programs, the fresh 
fruit and vegetable programs, the additional funds ($40 million for 
2008 and $50 million for 2009 released just a week ago) are all helping 
to meet our challenges.
    4. About eighteen months ago, using direct shipments of the USDA 
commodity low fat mozzarella cheese and USDA commodity fresh tomatoes 
we started to prepare are own (``home made'') lower fat, whole grain 
fresh pizza, which we deliver daily to all our schools as a part of our 
daily five menu offerings. the commercial distribution cost going up 
(fuel) and manufacturing coup, we were able to save over $150,000 in 
that period of time and at the same time were able to serve a healthier 
product. This year we started with healthier, lower fat (``home made'') 
burritos a la Chipotle and the students' response is very positive.
    5. 200 school districts in CA created a commodity processing and 
procurement cooperative. This co-op established long term (2-3 years) 
contracts with 50 manufacturers with guaranteed pricing, which is 99% 
better than the rest other CA school operations. Yes, we have some 
manufacturers trying to renegotiate the contracts, but so far we were 
able to keep most of the prices within our agreements.
    It is my opinion that all school districts, but especially the 
smaller entities, should look into establishing commodity processing 
and procurement cooperatives. To this day the commodity processing and 
procurement decisions are often left with the individual state 
distribution agencies, which may or may not know the needs of the 
school districts.
    There are also ways for you, our representatives, to help the 
school child nutrition operations across the country without any 
additional financial obligations.
    Help eliminate no value costs from our programs. The USDA delivers 
the commodities to processors (or our warehouses) for free, but many 
states charge the schools a ``handling fee''. In California, for 
example, it is $1 for every case of any commodity we send to our 
manufacturers or receive directly from the USDA to our warehouses--the 
state literally doesn't touch these cases at all. This is on the top of 
the funds (SAE) the state is receiving from the USDA. California's take 
(discretionary and non-discretionary funds) is over $20 million. Over 
$1.3 million is for food distribution! Only from our co-op (and 
therefore our children) the state of California is taking over 
$1,000,000 a year!
    Every year the USDA ``rolls over'' the commodity entitlement for 
each state regardless of whether the state under-spent or overspent 
during the preceding year. Because the price of the purchases changes, 
it is impossible for a state to ``hit'' the entitlement figure exactly. 
The USDA recognizes this and allows the state to carry over unspent 
dollars or to take overspent dollars out of the next year's 
entitlement. However, quite a few states do not allocate the overspent 
or under spent dollars based on the district previous year's 
performance. Therefore, it can happen that a district that didn't spend 
its entitlement one year will never see its funds again. The USDA 
should be required to have the states roll over entitlement (both over 
and under) to the districts that have the differences. This should be 
done for at least one year before the state is allowed to spend the 
money randomly.
    The USDA has been working for some time now on a pilot program to 
allow districts to use the entitlement dollars for purchasing fresh 
pre-cut produce from commercial channels. This program can become a 
great benefit to all districts. Work with the USDA to eliminate any 
remaining hurdles.
    As you all probably well know, milk must be offered with every 
lunch and every breakfast. An increase of 1 penny per serving 
negatively affects our operation by $27,000 a year--this represents 
almost 1% of our labor cost. Nationwide, the number is even more 
staggering--1 penny could increase the cost of providing school meals 
by $54,000,000 a year! And the cost of milk in California went up on 
average by $0.04--20% from 2006/07 levels! (Appendix III) There is an 
obvious question which will probably anger every dairy farmer in 
America and therefore a sane person would never ask; but because I'm a 
foreigner and a canceled Czech who doesn't know any better I will: do 
we have to really offer milk with every breakfast and every lunch we 
serve?
    Consider researching a national science based nutritional standard. 
Right now we are in danger of having 50 different nutritional standards 
all created for the good of our children, all of them just a slight 
variation from each other but making it more expensive for the 
manufacturers and therefore for the schools as well.
    In conclusion I would like to reiterate that there is a need to 
find a unifying solution to the impact our schools feel because of 
these fairly sudden increases in food and energy costs. I believe that 
a long-term solution can only be found if school districts and Congress 
consider some of the proposals I have spoken about--let's remember that 
every dollar saved from the general fund can go back to the classroom.
    Thank you for this opportunity to testify in front of your very 
essential committee.
                                 ______
                                 
    Chairman Miller. Thank you.
    Mr. Harnett?

   STATEMENT OF JAMES HARNETT, PRESIDENT AND CEO, FAMILY AND 
                     CHILDREN'S ASSOCIATION

    Mr. Harnett. Thank you, Mr. Chairman, members of the 
committee.
    Congresswoman McCarthy, thank you for that introduction.
    I am Jim Harnett, the president of Family and Children's 
Association, which serves 20,000 children, family and seniors 
in Nassau County in New York. We work to protect vulnerable 
children and families. And we welcome this opportunity to offer 
our recommendations on the afterschool and summer lunch 
programs.
    As Congresswoman McCarthy knows well, while Nassau County 
is perceived, understandably, as a well-off suburb, in the 
Village of Hempstead, where we operate our nutrition programs, 
every school meets the 50 percent eligibility requirement for 
the School Lunch Program. And across Long Island, all the way 
out to Congressman Bishop's district, in 2006-2007, 167,000 
children were enrolled in the School Lunch Program. Need and 
hunger recognize no political boundary.
    I want to describe the impact that rising costs will have 
on the summer food program and on the low-income children and 
families who are struggling with these rising costs. But I also 
want to remind us of the obvious. I have brought a couple of 
photos with me today to remind us this is about children.
    That little boy will benefit from the 2009 reauthorization. 
He looks young, but he is already in one of our programs, and 
he will be with us for a long time. The children with all those 
nice fresh fruits started our summer camp program on Monday, 
and I describe that program in my written testimony.
    It is important that we keep in mind, at the end of the 
day, we nurture our children now or we will pay an awful price 
later. These children represent millions of children who today 
benefit from the meals that, for most of them, are the best 
meals they will have today and, for too many of them, the only 
meal they will have.
    For children, no nutrition means no energy. No energy 
brings us to a topic that others have addressed better than I 
can, the price of fuel. But we cannot let this complex 
interplay affect the children. The fact, as the chairman noted, 
that some of the most common staples of milks and fruit and 
bread, cheese, the price has increased 17 percent, has an 
immediate and direct impact on the programs that we are talking 
about.
    The summer food reimbursement rate does not cover the full 
cost of meals in our county. And, fortunately for us, our 
county made a decision to use local public dollars to cover the 
program, so that over 2,600 children will participate each day 
in the summer food program. The cost of that program to the 
county will be about 21 percent.
    Obviously, the financial loss of operating the summer food 
program makes sustainability of this program a key issue. And 
although I do not have time to fully or adequately describe the 
impact of these rising costs on a family of four with less than 
$1,000 a month for all of their needs except for rent, I would 
ask that my written testimony be amended with the Wall Street 
Journal article from yesterday which did, I think, a very fine 
job of explaining how the summer food camp program is 
benefiting poor families.
    There is no question that next year the committee will be 
able to make significant improvements to the afterschool and 
summer nutrition programs through the Child Nutrition 
reauthorization.
    I have polled my colleagues, even over a busy holiday 
weekend, across the state, from Erie and Niagara all the way 
out to the East End in Congressman Bishop's district. And I can 
tell you, we all are in agreement that we would ask you to 
consider these changes in the programs.
    Increase the food snack allowance for hungry teenagers in 
the afterschool snack program. Make the afterschool supper 
program available to all states, so that school-aged children 
through age 19 may receive supper at an afterschool program 
located in low-income areas.
    Change the eligibility requirement to 40 percent from the 
current 50 percent so that afterschool and summer programs 
serving low-income children, especially in rural districts--my 
colleagues emphasize this. Rural districts have a much harder 
time meeting the standard than we do in suburban and city 
districts.
    Increase the current reimbursement rates for providing 
nutritious snacks and a healthy breakfast and/or lunch to 
offset these rising costs of food and fuel.
    Make the pilot program you created in California in the 
last reauthorization available to all states, allowing year-
round local government agencies and nonprofits to use the 
summer food service program to feed children 365 days of the 
year. And expand the program so that children can be eligible 
for suppers after school and meals on weekends and school 
holidays.
    Increase the summer food service program, which reaches 
less than one in five, about 20 percent of the children who are 
enrolled in the National School Lunch Program during the school 
year. The summer food program needs to be strengthened with 
additional funding to offset the prices of food, 
transportation, outreach, startup and expansion.
    And, by all means, reduce the paperwork and streamline the 
program so that more and more of the funds can be spent on 
food.
    Please use the 2009 reauthorization to improve these vital 
federal child nutrition programs so they can better meet the 
needs of our children and teenagers, especially those that are 
the poorest and most vulnerable, both after school and 
throughout the summer.
    Thank you.
    [The statement of Mr. Harnett follows:]

  Prepared Statement of James J. Harnett, President & CEO, Family and 
                         Children's Association

    Good morning, Mr./Madame Chairperson and Members of the Committee.
    I am Jim Harnett, the President of Family and Children's 
Association, a social service agency serving vulnerable and needy 
families and children in Nassau County, New York. Family and Children's 
is a leading human service agency on Long Island helping over 20,000 of 
our neighbors each year. We work to protect and strengthen Long 
Island's most vulnerable individuals especially children, seniors and 
families.
    The Agency serves people who often have no where else to turn; 
particularly those who struggle with social, emotional and/or economic 
challenges and lack adequate support systems. In addition to our 
Afterschool and Summer Nutrition Programs we offer 40 programs 
including the only shelter for runaway teens in Nassau County, provide 
the PINS (Person in Need of Supervision) Diversion Service for the 
County, family-focused programs to help parents and their children 
avoid foster care or court-appointed supervision; high school 
equivalency diploma & school enrichment programs to help young people 
succeed; outreach and in-home service to senior citizens to protect our 
most vulnerable neighbors; and many, many more programs. Our various 
counseling and referral services not only strengthen our clients, they 
often save families and individuals who are on the brink of disaster. 
We operate a countywide program to assist children with mental illness 
to remain with their families, two outpatient mental health clinics and 
two chemical dependency programs and four transitional and mental 
health residential programs.
    Our Summer Camp is an extension of our Promise Project. The Promise 
Project offers afterschool services to 6th, 7th and 8th graders from a 
middle school in the Hempstead School District. The Promise Scholars 
meet each school day to receive homework assistance, attend workshops 
and participate in activities geared towards promoting positive youth 
development, academic performance, and community connections. The 
project will work with these children until they complete high school. 
Upon graduation, each student will be awarded a $2,500 scholarship to 
the college or vocational school of his or her choice.
    The program began October, 2007 and the group's first community 
service project was an inter-generational holiday party with the senior 
residents of the Greenwich Street Apartments. The Promise Scholars 
helped serve food to the seniors who attended the holiday event and 
delivered dinners to the homebound who could not join in the 
celebration.
    Community volunteers and students from local colleges and 
universities have shared their skills and talents with the program. The 
children have received instruction in culinary arts, step dancing and 
physical education. There is a group for young men and a Girls 
Empowerment group. Plans for the upcoming year include a science club, 
additional instruction in the performing and visual arts and the 
Positive Action (tm) character education program. The Promise Project 
is staffed with professional staff and six youth counselors who are 
students at Hempstead High School.
    The Summer Camp will use the Olympics as a theme, not only for its 
obvious athletic activities, but as an opportunity for the children to 
learn as much as possible about China's people, culture, language, 
history, and current events.
    I appreciate this opportunity to offer our recommendations about 
the Afterschool and Summer Nutrition Programs for your consideration.
    As Congresswoman McCarthy knows very well, while Nassau County is 
perceived, understandably, as a well off suburb, in the Village of 
Hempstead, where we operate our nutrition programs, every school meets 
the 50% eligibility requirement for the school lunch program and, 
across Long Island in the 2006/7 school year, 167,000 children were 
enrolled. Need recognizes no political boundary.
    My purpose today is to describe the impact that rising food costs 
will have on our Summer Food Programs, and on the low-income children 
and families who are struggling with rising food costs, but I want to 
remind us of the obvious: the federal Child Nutrition Programs address 
the basic nutritional needs of disadvantaged children who count on 
these programs for their best, most nutritious meals of the day.
    I have brought with me some photos of children who participate in 
our Summer Feeding Programs in the Village of Hempstead. The first 
photo is of a boy already in our day care program and sure to benefit 
from the reauthorization. The second is a group of children in the 
Promise Project Summer Camp taken last Monday, on the first day of 
camp. Lastly, this is a group of our teenagers who are enjoying a well 
balanced meal.
    These children represent the millions of children who today benefit 
from the meals that for most of them will be their best meals of the 
day, and for too many their ONLY meals of the day! For years Congress 
has commendably seen fit to protect these children and assure they have 
at least a basic level of nutrition so they can go about their 
important business of learning and playing.
    Yes, playing, our programs place a special emphasis on play because 
that is what we all know makes children creative, inquisitive, and 
imaginative, the very qualities they--and our country--need to compete 
in the future, if they and we are going to maintain our leadership 
position in the world.
    No nutrition means no energy! No energy brings me to fuel.
    Those speaking before me today have ably explained the interaction 
and economics of food and fuel. What I want to talk about is the impact 
of these rising costs have on my program. Many of the foods that are 
staples in the Summer Food Program have increased at a disproportionate 
rate, which makes it harder to provide meals without losing money. For 
example, from April 2007 to 2008, the cost of milk increased by 13.5%. 
The impact of this on meal costs is substantial since all Summer Food 
meals must include milk. Bread increased by 14.1%, which significantly 
increases our costs since many of our meals include sandwiches. And 
cheese, a favorite with our kids, increased by 12%. These numbers are 
much higher than the 5.9% percent average increase in the cost of food.
    This summer, the Summer Food reimbursement rate will not cover the 
full cost of the meals, but our County has made the decision to support 
Summer Food with our very limited local public dollars. The County will 
cover 21% of the cost of operating the Summer Food Program. We choose 
to do this, because we are committed to providing nutritious meals to 
the children who participate in our summer camps. We expect that 2,650 
children will participate each day.
    Obviously, the financial loss of operating the Summer Food Program 
makes sustainability an issue, but we all realize that the rising food 
costs, which are increasing the cost of summer meals, are hitting our 
low-income families really hard. Too many families in our community are 
struggling with rising food and transportation costs. These economic 
conditions make the Summer Food Program even more important for our 
community.
    Imagine the impact of these rising costs on a family of four with 
fewer than $1,000 to spend each month for everything they need except 
rent! These families were already struggling and things are just 
getting harder for them. What happens if they live in a community that 
is unable to subsidize the Summer Food Program or must significantly 
reduce the quality of the meals in order to run the program without 
losing money?
    I worry for the Summer Food sponsors that do not have the capacity 
to subsidize the Summer Food Program. I wonder what will happen to the 
children who used to eat at these sites before the sponsors were forced 
to close their doors. The children still need access to those meals to 
get through their long summer vacation.
    Our children cannot wait for these matters to right themselves. 
They need good nutrition now. This past weekend, as we celebrated some 
of the inalienable rights we hold sacred as a nation, I could not help 
but think that for me--thanks to the wisdom of Congress--one of these 
rights is that our country will not let our poorest and most vulnerable 
children go hungry. We believe children must, at the very least, have 
one (better two: breakfast and lunch) good, decent, nutritious meal a 
day! Congress leads the way in this regard, and I hope and suspect I am 
preaching to the choir when I implore you to make some much needed 
adjustments in the budget for the afterschool and summer nutrition 
programs, ensuring that our children can continue to learn and grow to 
become the very people who will sit in your seats tomorrow!
    Though I realize it is not the purpose of today's hearing, and it 
is not within the Committee's jurisdiction, I would be remiss if I did 
not use this opportunity to urge Congress to at least temporarily 
increase food stamps at the earliest possible date. The low-income 
families that participate in my feeding programs would benefit greatly 
from immediate Congressional action designed to reverse the impact of 
this recession. Specifically, boosting the food stamp allotment by 20% 
(as the Senate proposed in the last economic stimulus package) would 
immediately increase the food purchasing power of the families we 
serve. Food Stamp benefits, which average $1 per person per meal, have 
not kept pace with the sky-rocketing cost of food, which is only going 
to get more costly. A boost in food stamp allotments would immediately 
result in more food--and more nutritious food--on the table of these 
families.
    Next year, the Committee will be able to make significant 
improvements to the Afterschool and Summer Nutrition Programs through 
the Child Nutrition Reauthorization. Improving these programs is 
crucial. Nonprofit agencies like mine will not be able to bear these 
costs and will begin to drop out of these critically needed programs.
    Even over a busy holiday weekend, our New York State Association of 
Family Service Agencies responded to my inquiry and endorsed the 
following proposals for reauthorization to improve these programs. Of 
course, we gladly support any improvements that can be made prior to 
reauthorization, such as through the appropriations process:
     The Afterschool Snack Program is an important resource, 
but it often does not provide children, especially teenagers, with 
enough food to get through the afternoon. If you have a teenager at 
home, I do not have to remind you how voracious an appetite they have 
after school and how important it is that they eat nutritionally 
balanced snacks--not just junk!
     Many afterschool programs are operating longer hours to 
better serve working families, which makes providing adequate nutrition 
even more important. Programs need to have the option of providing an 
evening meal if the program stretches into the late afternoon or 
evening hours.
    The Afterschool Supper Program allows school-age children through 
age 19 to receive supper at an afterschool program located in a low-
income area in ONLY eight states. (Fortunately, my state is one of 
them.) In most states only children under age 13 may receive supper. 
The states which provide this option for older children are required to 
do significant administrative work for that privilege. I ask that you 
expand the Afterschool Supper Program with a minimum amount of 
paperwork for children through age 19 in all states and allow schools 
to provide suppers through the National School Lunch Program.
     Many afterschool and summer programs serving low-income 
children cannot participate in the federal nutrition programs, because 
they are not located in an area where 50% or more of the children are 
eligible for free or reduced-priced meals. The 50% requirement is not 
consistent with eligibility requirements for other federal afterschool 
and summer programs, most notably, the 21st Century Community Learning 
Center Program--the largest federal funding source for afterschool and 
summer programs--which requires 40%. It is especially difficult to meet 
the 50% requirement in rural communities, which do not have the same 
concentration of poverty found in metropolitan and suburban areas. I 
ask that you lower the threshold to 40% across the board.
     Providing nutritious snacks for $0.68 cents or a healthy 
lunch for $2.98 is an enormous challenge in our area and elsewhere not 
close to the sources of food. Increasing fuel prices will drive up the 
cost of meals and snacks in the coming months. We would also love to 
serve our children fresh fruits and vegetables, whole grains, and low-
fat milk, but the current reimbursement rates for the afterschool and 
summer nutrition programs make that next to impossible. Please increase 
these rates, so that we can all provide our children more nutritious 
meals and snacks.
     As I am sure you know, many schools, local government 
agencies, and nonprofit organizations operate both afterschool and 
summer programs. Schools can provide meals to children year-round 
through the National School Lunch Program, which is terrific. 
Unfortunately, local government agencies and many nonprofits must 
switch back and forth between the Child and Adult Care Food Program and 
the Summer Food Service Program, if they want to feed children year 
round. Again, this greatly increases administrative work, because each 
program has different applications, eligibility rules, and 
requirements. Your last reauthorization created a pilot in California 
which allowed year round local government agencies (not including 
schools) and nonprofits to use the Summer Food Service Program to feed 
children 365 days a year. I urge that this pilot be extended to all the 
states.
    Colleagues tell me that the California pilot can and should also be 
improved. Currently, only snacks can be served during the school year. 
I recommend that children be eligible for suppers after school and 
meals on weekends and school holidays so that children will receive the 
nutrition their bodies need 365 days a year.
     Lastly, I implore you to give additional support to the 
Summer Food Service Program, which reaches fewer than one in five 
children who rely on the National School Lunch Program during the 
school year. The Summer Food Program needs to be strengthened with 
additional funding for food, transportation, outreach, start-up and 
expansion.
    The 2009 Reauthorization of these nutrition programs provides the 
critical opportunity to improve the Afterschool and Summer Nutrition 
Programs so our most vulnerable children can learn and play after 
school and during the summer.
    The nutritional value is obvious but must not be taken for granted. 
Across our country, these food programs have the important, added 
benefit of drawing children into quality programs like ours, which keep 
them engaged, safe and out of trouble, while their parents work. They 
boost student achievement and reduce juvenile crime and other at-risk 
behaviors.
    We need more afterschool and summer programs to participate in 
these nutrition programs, so that more eligible children have access to 
nutritious food as well as food for their minds. I believe if the 
paperwork and administration are streamlined and the reimbursement for 
real costs modified, more nonprofits and faith-based organizations will 
step up to make these programs available to more children.
    Please consider these recommendations and the others you are 
receiving and use the 2009 Reauthorization to improve these vital 
federal child nutrition programs. These programs need to be 
strengthened to better serve our children and teens both after school 
and during the summer.
    Thank you so much for your consideration.
                                 ______
                                 
    [Additional submission from Mr. Harnett follows:]

              [From the Wall Street Journal, July 8, 2008]

Currents: Summer Camp as Food Relief--Low-Income Families in U.S. Make 
                      the Most of a Vital Lifeline

                     By Roger Thurow and Anna Prior

    Lombard, Ill.--Summer camp at the York Community Resource Center in 
suburban Chicago offers all the usual activities: arts and crafts, 
sports, computer games, new adventures in reading. But the prime 
attraction for Elizabeth Castro, who drops off her two children every 
morning, is the activity that begins at noon: lunch.
    ``Food is very expensive this summer,'' says Ms. Castro, who sells 
shoes at a department store. ``Milk, bread, eggs, everything is going 
up and up. Except my income.''
    The severity of the global food crisis, born of increased demand 
and dwindling stockpiles around the world, can be measured in many 
ways: rioting in developing countries, rising barriers on the free 
trade of agricultural goods, and the inexorable creep of hunger in 
places like the Horn of Africa. In the U.S., where the impact has so 
far been less dramatic but no less acute for the nearly 13 million 
households struggling to put enough food on the table, an unlikely 
barometer has emerged: Day camps, parents' traditional antidote for 
summer idleness, are now also a bulwark against soaring food prices.
    To combat hunger in America, summer camps are spreading the word: 
There is such a thing as a free lunch.
    ``Free Meals this Summer for Kids and Teens,'' shouted a flyer 
distributed to Illinois students by a number of hunger-fighting groups 
as school ended last month. ``Don't let your children miss out!''
    It wasn't long before the Illinois Hunger Coalition's Hunger 
Hotline was besieged by parents asking about free-lunch sites. Through 
June, the number of calls had jumped more than 50% over last year's 
volume.
    The free lunch comes from an underused federal benefit called the 
Summer Food Service Program permanently created by Congress in 1975 and 
administered by the U.S. Department of Agriculture. It was designed to 
fill the hole when school ends and children no longer receive the free 
and reduced-price breakfasts and lunches available in school under 
other federal programs.
    Within two years, 2.8 million children were signed up for the 
summer meals. But that was where the program crested, hindered by a 
lack of sites and the scarcity of summer bus service. In the past 30 
years, summer meals never again approached three million while the 
school-year free and reduced-price meals feed nearly 18 million 
children.
    The gap between school and summer meals rarely cried out for 
attention until this year when food costs began exploding at a 
spectacular rate not seen since the early 1970s. A gallon of whole milk 
in May was up 15.4% over a year earlier, American cheese up 5.3%, a 
pound of white bread up 14.9%, eggs up 28%, government figures show. 
The price increases hit low-income households especially hard, since 
food costs comprise 10.5% of their total consumption compared with 5.5% 
for the richer households, according to a May report from Goldman Sachs 
Group Inc.
    The USDA reported that 1.5 million more people were receiving food 
stamps in March than a year earlier. America's Second Harvest, the 
nation's food-bank network, surveyed 180 member agencies and found a 
20% increase in the number of people coming into food banks this spring 
compared to a year ago.
    Enter the summer camps, which are proliferating in number and 
expanding enrollment across the country. The Food Bank of Northern 
Nevada reports that it is feeding twice as many children this summer, 
more than 6,000 a day, than last summer. The Bay Area Food Bank 
covering counties in Alabama and Mississippi served more than 12,000 
lunches this June, which is nearly double the number a year earlier.
    For lower-income families, the food-cost crunch is being 
exacerbated by the soaring fuel prices. In fact, the cost of gas is 
creating an odd pattern in the summer food programs. The Bay Area Food 
Bank, for example, has recorded a 40% drop in lunches served at more 
remote rural sites compared with a doubling at urban sites. Darcy Long, 
the food bank's child-nutrition manager, says parents claim high gas 
prices are keeping them from driving their children to the sites, some 
of which might be miles away from their homes. The choice facing those 
parents: gas or milk?
    Krish Patel, who earns $7.75 an hour working nights at a fast-food 
chain, says he gave up driving when gas hit $3.40 a gallon. He now 
walks nearly a mile from his apartment to the York Community Resource 
Center with his 10-year-old son, Deep.
    ``My son, he likes to eat. And the cost of everything he likes is 
up,'' says Mr. Patel, who says his food bill consumes nearly 15% of the 
family income.
    When lunch is served, Deep goes straight for the chocolate milk. At 
another table, 10-year-old America Torres puts down her book--Dr. 
Seuss's ``Oh, the Places You'll Go''--and tears into the meal: A 
peanut-better and jelly sandwich, carrot sticks with buttermilk ranch 
dressing dip, two plums, a packet of sunflower kernels and a half pint 
of milk. ``Sometimes, my lunch is also my breakfast,'' she says.
    ``We call it brunch,'' says a friend sitting across the table.
    Mariela Soejarto, the director of the community center, which is 
housed in the basement of the Church of the Brethren, serves about 40 
meals every day provided by the Northern Illinois Food Bank. ``I know 
some of the parents don't have enough food in the house, or they don't 
have time to prepare it because they are working,'' she says. ``For 
some of the children, this is the only place for them to come and 
eat.''
    Even schools are pitching in. In Chicago, there is the odd 
phenomenon of children going to school in the summer even when they 
aren't taking classes.
    A sign on the front door of the Michael Faraday Elementary School 
announces to the community, ``Meals are served'' and lists the times of 
breakfast and lunch below a drawing of two children sharing a cupcake. 
Under a new state law signed last fall, all neighborhood children are 
welcome to eat at schools in low-income areas that are offering summer 
classes.
    ``We know a lot of our children aren't getting meals unless they're 
eating at school,'' says Faraday lunchroom manager Leola Smiley, who is 
feeding more than 120 this summer. ``Dinner is potato chips, sodas, 
[Cheetos] Flamin' Hots,'' she says. ``Vegetables? They don't get any if 
they don't get them here.''
    This summer, Michelle Cox is feeding 300 children at two sites in 
the city of Waukegan at the Boys and Girls Club of Lake County, Ill. A 
waiting list stretches up to 100 children; a third site had just opened 
in the neighboring city of North Chicago. ``The food component of our 
program is absolutely vital for the parents and the kids,'' says Ms. 
Cox, the director of operations.
    Arriving at one of the clubhouses in Waukegan, Tera and Reginald 
Hooks get the rundown from their three children on what they had for 
lunch: a cheese sandwich, crackers, cherries, cucumbers, a granola bar 
and milk.
    ``I'm so thankful they're getting milk. We go through a gallon a 
day at home, and a gallon of milk now costs almost as much as a gallon 
of gas,'' says Ms. Hooks, who works at the township office.
    Kenneth Norels, who works at a cable company, needs the program so 
much that when he drops his boys off at the club every morning, he 
admonishes them to be on their best behavior. ``Now don't give them any 
problems,'' he tells them.
                                 ______
                                 
    Chairman Miller. Thank you.
    Ms. James?

  STATEMENT OF PAULA JAMES, DIRECTOR, CONTRA COSTA CHILD CARE 
           COUNCIL CHILD HEALTH AND NUTRITION PROGRAM

    Ms. James. Thank you, Chairman Miller and members of the 
committee, for this opportunity to testify about the rapidly 
rising cost of food and its impact on the child and adult care 
food program and, more importantly, the young children and 
families it serves.
    Rising food costs have more than ever increased the need 
for the child-care food program and, at the same time, have 
decreased access to the program and threatened to reduce the 
quality of meals served to young children. At a time when 
prevention of childhood obesity is of paramount concern 
nationally, we can afford neither.
    As families struggle to make ends meet, the Child Care Food 
Program becomes all the more important to help fill the ever-
widening gap between what foods families can afford to buy and 
what we know young children need to grow strong and healthy.
    More and more cash-strapped working families depend on the 
child-care setting to fill some of that gap through meals 
served while their child is in care. As a family child-care 
provider in Los Angeles stated, ``On Monday the kids are 
famished. They eat like they are starving. I don't know what 
they are eating on the weekends, but I have to plan big meals 
for Mondays.'' And a child-care center director in Concord, 
California, said, ``There is always the issue of hunger for our 
kids. They come to the center hungry, and they will eat 
anything.''
    The Child and Adult Care Food Program's good nutrition is 
important, not just because it provides enough food but because 
it provides the right food, the healthy food. In a recent USA 
Today-Gallup poll, 46 percent of those surveyed said that the 
higher cost of food is creating a financial hardship, primarily 
noticing an increase in the cost of milk, fruits, vegetables, 
meat, bread and eggs. These are the same foods that comprise 
the meal pattern for the Child Care Food Program.
    A center director from San Diego stated, ``I will need to 
downgrade my great center menus because we can't afford all of 
the variety, especially of fresh fruits and vegetables.'' And a 
San Mateo Head Start program, which serves over 800 low-income 
children, said, ``Last year our food costs increased 15 
percent. Are we still able to feed our children nutritious 
meals? Yes. But it comes with a price of reducing the quality 
of our educational services.''
    At the same time need is increasing, access to the Child 
and Adult Care Food Program is declining and nutrition quality 
is jeopardized. For some child-care providers and centers, the 
balance has shifted. The cost of the gap between the 
reimbursement level and the cost of meeting the meal pattern 
and required paperwork is finally pushing them off the program.
    Participation in the family child-care portion of the 
program has declined precipitously since tiering as part of 
welfare reform, and now we are seeing another significant 
decline. And for the first time, center participation has 
decreased. Only about 41 percent of children in licensed family 
child care are in a home providing Child and Adult Care Food 
Program meals and snacks. And I am concerned about the 
nutritional value of meals available to the other 59 percent.
    A recent California study compared meals served by homes 
that participated in the Child and Adult Care Food Program to 
meals brought from home and found that meals from home were of 
a significantly lower quality. Meals brought from home mostly 
contained juice and juice drinks, not milk; chips and cookies 
were common, and there were very few vegetables and sources of 
lean protein. And we expect these results to be confirmed in a 
larger statewide survey funded by the Robert Wood Johnson 
Foundation.
    A family child-care provider from Los Angeles had this to 
say: ``I shop at discount stores and try to stretch the money. 
I try to buy fresh fruits and vegetables, but the cost is going 
up. Everything we use--apples, broccoli, even the canned 
stuff--is going up. Milk has doubled.''
    We really need the food program. So many kids will suffer 
if we don't have it. And then learning will suffer. Yet I talk 
to providers every day who are leaving the program because they 
can't afford to buy the foods the program requires.
    A sponsoring organization in Alameda County noted that, 
``Providers are cutting back on seconds. They are serving more 
crackers instead of vegetables as snacks, and less milk because 
it is too expensive. The quality of food choices has changed.''
    Rising food and fuel costs have also threatened access by 
exacerbating longstanding pressures on an already-fragile 
child-care food program support system, the community-based 
organizations that sponsor the Child and Adult Care Food 
Program participation for family child-care homes.
    California has seen half of the program's sponsors drop out 
in the last 12 years. Nationally, 27 percent have dropped. In 
my own organization, the Contra Costa Child Care Council, our 
board of directors has authorized $100,000 of other agency 
funds to subsidize the cost of administering our Child Care 
Food Program.
    So what are some of the solutions for protecting access and 
quality of meals for our very young children in this time of 
increasing need?
    First, we would support the recommendation to insert a 
trigger requiring a mid-year adjustment for child nutrition 
programs if the CPI rises above a certain level.
    Secondly, the 2009 Child Nutrition Program reauthorization 
will be an important opportunity to improve the program. And I 
have outlined many of those recommendations in my written 
testimony. I would, however, like to highlight two.
    The first is to increase, obviously, the Child and Adult 
Care Food Program reimbursement to reflect the increased costs 
of meeting the program requirements and hopefully the dietary 
guidelines.
    And the second would be to enhance sponsoring 
organizations' reimbursement rate for serving family child-care 
homes in low-income areas to cover the additional costs of 
visits and time spent in helping providers overcome literacy 
and language issues.
    Again, I want to thank you for this opportunity to share 
what we know about the impact of rising costs on the Child and 
Adult Care Food Program. Clearly it is in the best interest of 
millions of young children in child care to act to protect the 
Child and Adult Care Food Program access and quality in this 
time of increasing need.
    And I would like to close with a quote from a child-care 
center director in Congressman Miller's district, who said, 
``We worked really hard to make really good changes to our 
menus to provide nutritious meals for our kids. We can't go 
back on them, and we won't, even if it means the money we had 
for instructional materials has to be spent on food.''
    Thank you for this opportunity.
    [The statement of Ms. James follows:]

  Prepared Statement of Paula James, Contra Costa Child Care Council, 
            California CCFP Roundtable, National CACFP Forum

    I appreciate the opportunity to talk this morning about the impact 
of rapidly rising food prices on the Child and Adult Care Food Program, 
young children in child care, their families and child care providers.
    The Child and Adult Care Food Program, a federal nutrition program, 
is a key source of support for child care in family child care homes, 
Head Start and child care centers. The program provides reimbursement 
for food and meal preparation costs, ongoing training in the 
nutritional needs of children, and onsite technical assistance in 
meeting the program's strong nutritional requirements. The Child and 
Adult Care Food Program (CACFP) provides high quality nutrition and 
learning experiences for three million children each working day: 2.3 
million children in child care centers and 850,000 children in child 
care homes.
I. The impact of rising food costs
    Rising food costs have increased the need for the Child and Adult 
Care Food Program, decreased access to the program and threaten to 
reduce meal quality.
            A. Rising food costs are increasing the need for CACFP
    The urgent need for CACFP has increased as families struggle to 
make ends meet in the face of rising food costs. CACFP becomes even 
more important to help fill the ever widening gap between what families 
can afford to buy and what young children need to stay healthy and grow 
strong. More and more children are coming to child care hungry.
    I would like to share two stories, both indicative of what we are 
hearing from child care providers and centers around the country:
     A child care center director using CACFP to serve 150 
children from a very low-income Latino community said, ``Our milk bill 
increased 25 percent this year. There were huge increases in all the 
other foods that form the basis of good nutrition. If we are having 
trouble buying milk imagine what it must be like for our families. 
There is still the issue of hunger. Children come to our center hungry 
and they will eat anything.''
     ``This program is really important.'' said a CACFP family 
child care provider, commenting of the impact of rising food costs. 
``On Mondays the kids are famished. They eat like they are starving. I 
don't know what they are eating over the weekends, but I have to plan 
big meals for Mondays.''
     ``The kids are hungrier and they eat more food.'' Said a 
provider describing the impact of the rising cost of food on the 
children she serves.
    These hungry children are experiencing food access problems at a 
crucial period of growth, when healthy bones and muscles are formed and 
the brain is learning to make important connections. In this era of 
rising food prices CACFP is an absolutely essential support for child 
care centers and providers working to provide plenty of healthy 
nutritious food to the young children in their care.
    Studies have documented the importance of good nutrition, and 
CACFP, to young children's development and achievement. For example, 
USDAs' Evaluation of the Child and Adult Care Food Program found that 
children in CACFP received meals that were nutritionally superior to 
those served to children in child care settings without CACFP. For a 
summary of other research demonstrating the positive impact of CACFP 
please see the attachment fact sheet.
    I would like to highlight the positive findings of our recently 
completed California study. When comparing the meals and snacks 
children brought from home to eat in child care without CACFP to the 
meals and snacks served in child care with CACFP, we found that meals 
and snacks brought from home had significantly poorer quality than 
meals and snacks served by CACFP providers. (Children were sent to 
child care with a wide range of foods including a McDonald's McGriddle 
with sausage.) Meal quality was higher for the CACFP meals which 
generally featured more fruits and vegetables, lean meat and milk. For 
example, none of the meals and snacks from home included milk.
    CACFP's good nutrition is important not just because it provides 
enough food but because it provides the right foods. As we pointed out 
earlier, families are being squeezed by increased costs in many areas, 
trying to keep their children housed, clothed and fed requires hard 
choices. Contributing to the difficulty is the fact that many of the 
healthier foods have increased in cost even faster than less healthy 
foods. The April 2008 Journal of the American Dietetic Association 
article, Increasing Food Costs for Consumers and Food Programs 
Straining Pocketbooks, pointed out that ``Recent research looking at 
the price changes in low- and high-calorie foods also indicate that 
food price increases vary by food category. Low-calorie food (primarily 
fruits and vegetables) cost 20% more in 2006 compared to 2004, while 
calorie-dense foods including potato chips, cookies, and candy bars 
cost 2% less over the same 2-year time span.''
    Nutrition problems start early. The number of overweight preschool 
children has grown significantly. According to the Centers for Disease 
Control and Prevention 5 percent of children age 2-5 were overweight in 
1980. By 2004, that number had grown to 14 percent. Research has shown 
that these children are much more likely to be overweight as teenagers 
and that overweight teenagers are more likely to be overweight adults.
    Many children are in care over eight hours each day and eat the 
majority of their meals at child care. Child care plays a central role 
in providing healthy food and shaping the nutrition habits of young 
children. Since many of the habits learned in the preschool years will 
last a lifetime, CACFP can help to make sure that these nutrition 
habits are good ones.
    We believe it is especially important now to strengthen nutrition 
program supports, as well as connect more families to CACFP and other 
federal nutrition programs, that can help them stretch their limited 
funds and access to healthy foods.
            B. Rising food costs are threatening access to CACFP
1. access to cacfp is declining and nutrition quality is threatened as 
  child care providers and centers are pressed to the limit by rising 
                              food prices
    At the same time need is increasing, access to CACFP is declining 
and nutrition quality is threatened. We risk a deterioration in the 
quality of nutrition served and providers dropping out because, to the 
degree reimbursement levels are too low to begin with, even with an 
index for inflation, the cost of the un-reimbursed part of the program 
is rising rapidly and deterring participation or quality improvements. 
The rising costs generate additional pressure in an already delicate 
balance between the value of CACFP to child care centers and providers 
and the ``real costs'' to participate including excessive and for some 
difficult paperwork. If providers and centers choose not to 
participate, then children have no choice.
    The cost of food is rising rapidly, with the cost of food necessary 
to meet the CACFP meal pattern requirements rising even faster. For the 
2008-2009 year the inflation adjustment for child care centers 
reimbursement rates is 4.272 percent (based on changes in the Consumer 
Price Index for Food Away for Home) and 5.773 percent for child care 
homes (based on changes in the Consumer Price Index for Food at Home.) 
The price of milk, a key component of CACFP's nutritious meals, has 
risen 10 percent in the last year.
    Here are some quotes typical of the stories playing out across the 
country:
     ``I shop at discount stores and try to stretch the 
money.'' Said a long time CACFP family child care provider. ``I try to 
buy fresh fruits and vegetables, whatever is in the store that week, 
but the cost is going up. The cost of apples is way up. Bananas, you 
couldn't even get them for awhile. Everything we use: apples, broccoli 
* * * is going up. Even the canned stuff is going up and the fresh is 
even higher when you can get it. Milk has doubled, and that's every 
day. Plus I buy soy milk for the kids who can't drink milk. We really 
need the food program. So many kids will suffer if we don't have it. 
And then the learning will suffer. I'm not out buying a Cadillac with 
my check. I buy food and I supplement it with my own money.''
     ``We are taking away from our instructional materials 
funding to feed our kids. It is essential with the obesity crisis, that 
we take the responsibility to insure they have healthy meals. We really 
serve low-cost meals and serve lots of beans.'' A CACFP low-income 
child care center director explains. ``In November and December we buy 
up turkeys cheap and stuff our freezers and use them for our protein 
source all year long. And the cost of all our food related supplies 
have gone up too, deliveries have added fuel charges and pass on the 
increased costs. We are now pulling money from other programs to pay 
for the extra food costs.''
     A provider commenting on the cost to children and families 
said, ``The kids miss the meat most of all. The variety of fruits and 
vegetables is limited because we have to buy at Costco and they have a 
very limited variety in the #10 cans. We now have to ask parents to 
supplement our food service and bring food to provide the additional 
snack we are not reimbursed for.''
     A director of Head Start and Pre-K programs serving 640 
children in the school year said, ``Our fiscal people say that we will 
subsidize CACFP reimbursements to fill a short fall of $100,000.''
    For some child care providers and centers the balance has shifted, 
the cost of the gap between the reimbursement level and the cost of 
meeting the CACFP meal pattern and paperwork is finally pushing them 
off the program. In many cases, providers do not the resources to make 
up a significant shortfall because child care is a low-income 
profession. Participation in the family child care portion of the 
program continues to decline and for the first time child care center 
participation has decreased. Only about 41 percent of the children in a 
licensed family child care are in a home providing CACFP meals and 
snacks. I am concerned about the nutritional value of the meals and 
snacks available for the 59 percent of children in homes without CACFP.
    The family child care providers tell us ``It is just not worth 
it.'' It is easier to serve cheap less nutritious meals and to operate 
without the CACFP oversight and the paperwork burden. It is also common 
for providers and centers to forgo a meal service altogether and simply 
let children rely on food sent from home.
     A CACFP sponsor explaining the barriers to participation 
for providers said: ``We also consistently heard from the child care 
providers about the difficulty completing the paperwork, the amount of 
time it took from them which meant less time for quality interactions 
with children. Many providers for whom English is a second language had 
a difficult time with the paperwork, the amount of time it took for 
them which meant less time for quality interactions with children.''
    The negative impact of rising food costs has intensified existing 
barriers to participation in the programs including the means test in 
the family child care portion of CACFP. Before the implementation of 
the means test the family child care portion of CACFP was one of the 
fastest growing federal food programs. Since the implementation of the 
means test, the number of family child care homes, children and meals 
and snacks served in family child care homes through CACFP has been 
declining steadily. Since the implementation of the means test, there 
has been a 27% drop in the number of family child care homes 
participating in CACFP. (Thirteen states have had a drop of 42% or 
more.) It is time to STOP THE DROP!
2. access is threatened as rising food prices push cacfp support system 
                          to the tipping point
    Rising food and fuel costs also threaten access by exacerbating 
long standing pressures on the already fragile CACFP support system. 
The network of CACFP sponsors, the non-profit community-based 
organizations supporting the CACFP participation of family child care 
homes, is breaking down as sponsor after sponsor leaves the program. 
This is particularly problematic in California where half of the 
sponsors have dropped out in the last twelve years. Nationally, 27 
percent of the sponsors have left the program.
    In the 2006 USDA report, Administrative Costs in the Child an Adult 
Care Food Program: Results of an Exploratory Study of the Reimbursement 
System for Sponsors of Family Child Care Homes, researchers reported 
that ``Costs reported by sponsors on average were about 5 percent 
higher than allowable reimbursement amounts.'' The current increases in 
food and fuel prices are pushing an already underfunded system further 
into the red.
    CACFP sponsors struggle with increasing costs:
     ``we have added homes from other counties as the sponsors 
in those areas decided to stop sponsoring the program. In the interest 
of providing the services of the programs, 4Cs decided to expand our 
service area * * * It costs more, of course, to monitor in the extended 
areas: both the mileage costs to monitor and the additional staff time. 
For example to monitor a home in Corte Madera, 42 miles away, it takes 
at least a 3 hours travel time.'' said the director as she described 
the need to supplement CACFP with other funding. She then went on to 
address another contributing factor tipping the cost neutral balance, a 
loss of economies of scale for CACFP sponsorships as providers food 
costs go up and they drop out of the program. ``We are struggling to 
maintain the current number of active providers * * * From a provider's 
point of view the program requirements are too strict, especially when 
they get reimbursed such a small amount for breakfasts and snacks.''
     In describing the pressures that led them to recently drop 
their sponsorship of CACFP the vice president of the Child Care 
Resource Center said, ``CCRC gave up the federal nutrition program 
because of the low administrative reimbursement combined with draconian 
reporting requirements for the monitoring staff. It was with great 
sadness that we gave this program up--we believe strongly in the value 
of providing nutritious meals to low-income children, and providing 
nutrition education to the family child care providers. ``she said, 
``Should the administrative reimbursement increase and reporting 
requirements become more reasonable we would be very willing to become 
a food program provider[sponsor again].''
    Child care plays a central role in shaping the nutritional habits 
of young children. Through in-home visits, group classes, and ongoing 
assistance and support CACFP sponsoring organizations teach child care 
providers not just the importance of good nutrition but practical 
advice and guidance on serving good and nutritious food. Unfortunately, 
as the paperwork and cost of administering the program increase 
exponentially, quality nutrition education is being squeezed out and 
sponsors are dropping out of the program. This is particularly 
problematic given the negative impact of rising food costs including 
the growing rates of food insecurity in families with young children 
and the continuing need to address the increasing rates of overweight 
and obesity in preschool children.
II. Potential solutions: Options for protecting access and quality in a 
        time of increasing need
    We would like to offer our recommendations for the stimulus or 
other bills focused on ameliorating the negative impact of the rising 
food costs on low-income families. We know there is a conversation 
about reimbursements which we will address in detail in our 
recommendations. Rising food costs are ultimately about children and 
families struggling to make ends meet. We need to open the door to 
CACFP and solve access problems. Today we will focus on opportunities 
within this committee's jurisdiction, not discuss the need to include 
additional funding for food stamps in the next stimulus bill, but 
instead focus on recommendations for the short term (the stimulus) and 
long-term, next years' Child Nutrition Reauthorization.
            A. Stimulus bill
    We recommend the inflation adjustment for the child nutrition 
programs be improved by inserting a trigger requiring a mid-year 
adjustment if the relevant Consumer Price Indexes rise above a specific 
level. In years with rapidly rising food inflation a mid-year 
adjustment would help to more quickly bring some much-needed relief to 
CACFP child care providers and centers struggling to serve nutritious 
foods on a limited budget.
    The rapidly rising food costs during this past adjustment year 
(July 1, 2007 to June 30, 2008) provide an example of the need for a 
mid-year adjustment:
     For the average CACFP family child care provider serving 
low-income children a breakfast, lunch and a snack, a mid-year 
adjustment would have resulted in an additional $55 for the second half 
of the year.
     Providers serving children from a mix of incomes (half and 
half) would have received about $43 more in CACFP reimbursements the 
last six months.
     Family child care providers serving children with incomes 
over 185 percent of poverty a CACFP breakfast, lunch and snack would 
have received $31 more for the second half of the year. (On average 
CACFP providers serve 6 children.)
     The average CACFP child care center, serving 45 children a 
breakfast, lunch and snack, would have received approximately $380 more 
in CACFP reimbursements in the last six months. (Participation 
assumptions based on national averages: 63% Free, 8% Reduced Price, and 
29% Paid Category.)
    A provision of this type would need to amend not only the school 
meals adjustment but also the adjustment section for the CACFP family 
child homes in 42 U.S.C. 1766(f)(3)(A)(ii)(IV). CACFP family child care 
home rates are adjusted based on the Consumer Price index for ``Food at 
Home.'' Adjustments to the CACFP child care center rates are the same 
as the school meals adjustment (CPI for ``Food Away From Home'') and 
are determined in the school meals adjustment section.
            B. Child Nutrition reauthorization
    The 2009 Child Nutrition Programs Reauthorization will be an 
important opportunity to improve the program. There are millions of 
children in child care who could benefit from CACFP but are currently 
unserved. The following recommendations would help to improve program 
access and protect the quality of CACFP services for children in child 
care.
    Streamline Access for Eligible Low-Income Children:
     Reduce paperwork by extending CACFP categorical 
eligibility to other beneficiaries of means-tested federally funded 
programs supporting working families, including Medicaid/SCHIP 
programs.
     Reduce the area eligibility threshold in family child care 
from 50 percent to 40 percent.
     Establish area eligibility for child care centers.
    Enhance Meal Reimbursements:
     Dramatically revise or eliminate the burdensome CACFP 
means test for children in family child care homes and thereby open up 
access.
     Allow CACFP to offer the option of a third meal, most 
likely a supper, for children in child care centers over eight hours.
     Increase CACFP reimbursements to reflect the increased 
costs of meeting the Dietary Guidelines.
    Improve CACFP's ability to reach low-income families by 
streamlining program and paperwork requirements:
     Streamline program operations, increase flexibility, and 
maximize technology and innovation to allow sponsoring organizations 
and providers to operate most effectively.
     Direct the Secretary to revise the Block Claiming criteria 
to be consistent with the reality of serving low-income families in 
child care.
     Allow carryover funds and CACFP sponsoring organizations 
to plan multi-year administrative budgets.
     Restore the right to advance funds for sponsors and child 
care centers to cover program costs up front.
     Allow CACFP family child care providers to facilitate the 
return of participating children's family income form.
     Continue USDA Paperwork Reduction Initiative.
    Improve the Nutritional Value of the Meals and Snacks Served:
     Direct the Secretary of Agriculture to issue proposed 
regulations updating the CACFP meal pattern, including recommendations 
for the reimbursements necessary to cover the costs of the new meal 
pattern, within 18 months of the publication of the IOM CACFP Meal 
Pattern report. (We are hoping to get the IOM study funded through the 
appropriations process this year.)
    Strengthen the Support System:
     Increase the sponsors' administrative reimbursement rate 
with nutrition education funding.
     Enhance sponsoring organization reimbursement rates for 
serving family child care homes in rural areas to cover transportation 
costs.
     Enhance sponsoring organization reimbursement rates for 
serving family child care homes in low-income areas to cover the costs 
of additional visits, and time spent in helping providers overcome 
literacy and language issues.
     Fully fund USDA FNS child nutrition functions to restore 
adequate staffing levels for the child nutrition programs at the 
federal and regional level.
III. Conclusion
    Thank you for this opportunity to share what we know about the 
impact of rising food costs on CACFP. Clearly it is in the best 
interests of the millions of young children in child care to act to 
protect CACFP access and quality in this time of increasing need. I 
would like to close with a quote from a CACFP child center director who 
said ``We worked really hard to make really good changes to our menus 
to provide nutritious meals to our kids. We can't go back on them.''
                                 ______
                                 
    [Additional submissions from Ms. James follow:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Chairman Miller. Thank you.
    Thank you, again, to all of you.
    Mr. Matustik, you talked about this joint powers 
interagency agreement that you have. Is that unique in 
California? Do other districts do this?
    Mr. Matustik. Mr. Chairman, as far as we know, we are the 
only school food service JP or intergovernmental agency in 
California for sure and maybe in the nation. There are other 
JPAs for other reasons, but not for the food.
    Chairman Miller. Right.
    Dr. Wilson, would that be right?
    Ms. Wilson. Yes, he really has been kind of on the leading 
edge of putting this together, and has put a number of 
districts together. And we don't know of any other one that 
operates under the same conditions with this intergovernmental 
agency.
    Chairman Miller. Is that a model worth exploring?
    Ms. Wilson. I am sorry?
    Chairman Miller. Is that a model worth exploring?
    Ms. Wilson. It absolutely would be. I think that there are 
challenges to that, as well. They are lucky to have a director 
that is knowledgeable and trained in that program, but I think 
when you look at all the little, tiny districts throughout this 
country, it is difficult for them to even come together and 
bring that together. And then, too, you know, it takes dollars 
to even put something like that together.
    A number of school districts across the country have formed 
co-ops with other districts, but then you have to pay somebody 
to run that. You also have to have the warehouses to put all 
the food in if you are buying in bulk or buying in larger 
quantities.
    But it is definitely something worth exploring.
    Chairman Miller. Mr. Matustik, do you want to comment on 
that?
    Mr. Matustik. The biggest hurdle we found--because we have 
districts who come to us and ask for expertise and advice, but 
then suddenly you have egos starting to work in, because you 
put five districts together, you are losing, minimum, four 
directors, maybe five. People like to own. You know, the 
business managers, the superintendents like to own their food 
services. They just need to start looking at it completely 
different, and I think that if they go into it, you see the 
rewards.
    Chairman Miller. Thank you. That is worth considering.
    Ms. James, thank you for your testimony. We have obviously 
started to recognize at the national level, and certainly 
people all across the country have, the question of childhood 
obesity. And you suggested in your testimony that we are 
getting to a point where what we know we should do and what we 
are starting to do, because of prices, is starting to get 
compromised.
    Do you want to elaborate a little bit?
    Ms. James. Well, first of all, I would like to say, and I 
didn't have a chance to say in my testimony, that the Child and 
Adult Care Food Program is a program that we should be growing, 
as opposed to seeing it decline. Because, certainly, what we 
know about the prevention of childhood obesity is really 
becoming more focused on very young children, specifically 
children under the age of 5.
    I think it certainly speaks to the fact, when we look at 
the American Academy of Pediatrics, it has recently recommended 
perhaps giving cholesterol medication to children at the age of 
8, and certainly we know that children really need to have a 
very healthy start and be exposed to a lot of variety and 
healthful foods in child care and certainly before the age of 
5.
    Chairman Miller. You mentioned the kinds of foods that are 
starting to creep into the program as people downgrade the 
quality.
    Ms. James. You know, certainly at a time when we are really 
struggling to try to increase fresh fruits and vegetables and 
whole grains, not only in schools but certainly in the child-
care setting, I find myself in an uncomfortable position, 
trying to educate child-care providers to increase that 
consumption or increase the servings of fresh fruits and 
vegetables and to buy the whole grains, because the cost is 
prohibitive.
    I mean, I think as Judy Wagner from Concord Child Care 
Center said, it is really difficult for us to be looking at 
serving fresh fruits and vegetables when the kinds of crackers 
and other foods like that that we can serve children that 
really meet the federal guidelines for this program are so much 
cheaper.
    So I think we are sort of between a rock and a hard spot in 
this situation. We know what people should be serving, and we 
know what we should be providing, but the reality is what the 
cost is, is making it prohibitive. And for people in the child-
care business, they are also very low-income to begin with. 
There is not a lot of room for margin in that.
    Chairman Miller. Thank you.
    Mr. Faber, it appears that we have sort of walked into a 
perfect storm here on a number of issues. Clearly, some 
recognition that there may be a worldwide food shortage as 
nations become richer, certainly countries like India and 
China, and then the droughts in Australia putting pressure on 
grains, the droughts through Africa putting pressure on grains.
    Countries now, as you point out, putting export controls 
because they are fighting about whether or not they will be 
able to sustain, in some cases, subsistence levels for 
individuals in those countries. The increased energy costs that 
you point out, and then of course you can overlay that with 
weather in good parts of the world and in the United States.
    You said you thought that food prices would continue up at 
9 percent a year? Is that what you are saying?
    Mr. Faber. That is correct.
    Chairman Miller. Mr. Leibtag, is that consistent with what 
you think or what the department thinks?
    Mr. Leibtag. Nine percent, no. What is the number? I don't 
know what your estimate for yours is, but----
    Mr. Faber. Bill Lapp, who is an independent economist, 
estimates what average food price inflation would be between 
2008 and 2012. And he looked at what commodity prices were 
likely to be in light of increased production of food-to-fuel, 
as well as the other factors you talked about, in particular 
steadily growing global demand for protein and cereal grains, 
in particular. And he estimated that food prices would increase 
by a rate about 9 percent over the next 5 years.
    Chairman Miller. Mr. Leibtag?
    Mr. Leibtag. That is certainly way above our estimates, at 
this point. As I mentioned, we are looking at about 5 to 5.5 
percent this year. Certainly there will be some pressure on 
meat and poultry products for the next 2 or 3 years.
    But the overall--again, we have to remember here that there 
is a difference between high prices and high inflation. I think 
that the price levels we are at now are probably not going to 
go down any time soon, but the rate of acceleration I don't see 
as being that high going out beyond the next year, year and a 
half.
    But I will just add the one point. You know, the big 
question mark is energy markets, because so much of what is 
going on now is based on where we are at $130 more a barrel for 
oil and there is a lot of uncertainty there. A lot of the 
models people are looking at are assuming the energy market 
that, you know, probably we are never going to get back to. So 
there is some uncertainty.
    Sorry, go ahead.
    Mr. Faber. It might be worth noting that USDA has had a 
hard time estimating these sorts of increases in food price 
inflation and has fairly consistently underestimated the 
increases in the last few years.
    So I think the--to get back to what I think your main point 
is, Mr. Chairman, is that, in light of all of these other 
factors, are they likely to diminish or are they likely to 
continue? And clearly, everything we know about global demand, 
we expect to see very significant increases, especially as 
people in China and India enjoy first-world lifestyles and 
consume more protein in their diets.
    And in light of that factor, when you just step aside and 
look at what are global commodity stocks, how low are they, how 
fast is demand increasing, and what is happening with global 
agricultural productivity, when you look at that picture, it is 
a troubling picture.
    Because, in the 1970-to-1990 range, global agricultural 
productivity was increasing about 2 percent annually. That has 
fallen to 1.3 percent and is expected to fall to 1.2 percent 
annually over the next decade. So, essentially, we have kind of 
a classic supply-demand problem, not so much a problem of a 
perfect storm.
    Chairman Miller. When you talk about--just quickly here--
when you talk about food-to-fuel, the Department of Energy and 
USDA said that is about 4 percent of the increase. So 4 percent 
of the 5 percent is food-to-fuel. But there are other, 
obviously, energy costs in there beyond that. And I am standing 
by your testimony, the play-out in terms of the utilization of 
the resources and that, but--and direct impact on food.
    Mr. Faber. Well, there are a range of estimates. The UNFAO, 
the World Bank, the IMF have all attributed significant 
increases in the price of commodities and, ultimately, the 
price of food to the recent sudden increase in the production 
of biofuels. I don't think there is any doubt that it is the 
dominant factor in the increase in price of especially corn in 
the last few years. There are different estimates because 
different models are being used.
    I think the right question to be asking is, how much more 
of our corn crop and our soybean crop do we want to dedicate to 
fuel production in light of these other factors and in light of 
the fact that the E.U., other nations, are also enacting 
similar mandates?
    No one has really looked at how these mandates are going to 
interact to drive up the price of these basic commodities in 
the next few years and, ultimately, drive up the price of food 
and the cost of administering these important programs.
    Chairman Miller. Thank you.
    Mr. McKeon?
    Mr. McKeon. Thank you, Mr. Chairman.
    Mr. Leibtag, your testimony makes clear that corn plays a 
major role in our food prices and costs. And unfortunately you 
state that, ``Due to the continued expansion of biofuel 
production, corn prices will likely be maintained at these 
historically high levels, which will in turn affect beef and 
poultry prices also.''
    Can you provide any recommendations for how to combat these 
rising costs?
    Mr. Leibtag. On the producers' side, I mean, the question 
is always efficiencies, whether we are talking about a school 
lunch program, food services, livestock/poultry production. As 
you mentioned, I don't think, given the current situation, we 
are going to see any drop in corn prices in the near future. 
Again, it is tied to the energy markets quite a bit.
    The way to save is to find other places to be more 
efficient. Whether that can happen, again, depends on the 
particular practitioner. But, you know, at this point, corn is 
a major ingredient in our animal feed, and it is becoming a 
bigger and bigger ingredient in our energy equation.
    So I think that efficiencies are what you have to find, and 
that is what markets do. I mean, as an economist, I have to 
believe in markets on some level, and I do. And so that is 
where things are going to head in terms of producers and the 
choice of who is using the resources that are available in the 
world.
    Mr. McKeon. What about, like, in other places where they 
are using sugar beets or other commodities other than corn? Do 
we have the possibility of using other commodities, or is that 
a matter of acreage and it is going to be one or the other?
    Mr. Leibtag. Ultimately we need to find additional 
alternative sources for energy. Corn turned into ethanol is not 
the solution on its own. You know, what Brazil has done with 
sugar, again, is another part of the solution, but I think even 
together, combined--it is not just going to be ethanol.
    Mr. Faber. If I could just add one note on that, is that 
this year we will import about 650 million gallons of sugar 
ethanol from Brazil, but we could potentially import anywhere 
from 10 billion to 15 billion gallons of sugar ethanol from 
Brazil if we eliminated the 54-cent tariff on the imports of 
that ethanol.
    Fortunately, Brazil won't increase its production to serve 
our market if they don't think they will have access to our 
market. And right now they don't. And there are certainly 
opportunities in some of the legislation that might still be 
enacted this year to address that issue.
    Mr. McKeon. If we could vote on those, yes.
    Mr. Matustik, in your testimony you talked about the joint 
powers agreement, and the chairman asked you some questions 
about that. I am, of course, very familiar with it, having 
worked with those school districts.
    What it is, in the Santa Clarita Valley, we have one high 
school district that services the whole valley and then four 
elementary districts that feed into the high school district.
    You know, we could do the same kind of thing out in the 
Antelope Valley. We have a high school district out there, and 
we have all the elementary districts. But you have pointed out 
some of the problems with trying to get the people to get the 
other--have they talked to you? Have the people in the Antelope 
Valley come down and talked to you about this?
    Mr. Matustik. No, they didn't. They were doing--I don't 
know how their fiscal situation is right now, but they were 
doing okay.
    However, you may be aware of, let's say, Whittier area, 
where we have quite a few small districts. There seems quite an 
interest from superintendents to put something similar 
together.
    Mr. McKeon. Actually, they are not that much different now. 
Antelope Valley is a little bit larger, but not that much. If 
you take Palmdale, Palmdale would be smaller than Santa 
Clarita. Lancaster would be smaller. Together they are a little 
bit larger. But I am going to talk to them, see if we can get 
them to talk to you to see if we can try to work something.
    Mr. Matustik. You have some really small districts around 
Palmdale and Lancaster that need help. They certainly need--one 
of those districts asked if we can help them, but we are too 
far. For us, it would be, like, 70 miles, 80 miles roundtrip--
--
    Mr. McKeon. Transportation costs would wipe that out.
    By doing the co-op, though, you save a million dollars a 
year?
    Mr. Matustik. Well, minimum, yes. Because, as I said, this 
is for the 2007-2008 school year, we gave the member districts, 
those five member districts, we gave them $700,000. When I 
started there 15 years ago, they were about $250,000, $300,000 
in the hole every year, which had to come from the general 
fund. So now we have reversed the situation and we are giving 
back money to the general fund.
    Mr. McKeon. So you are doing a better job of providing the 
food, plus saving money.
    You talked about one more thing, if I could, seeing as how 
we are both from California, the $1 that the state charges for 
every case that they handle.
    Mr. Matustik. That is my complaint, Mr. McKeon, for the 
last 15 years, but it is getting worse and worse, in my 
opinion.
    I can see the historical reason for it before the computer, 
that they needed people who were counting cases.
    Here, this time, when USDA is so flexible and absolutely 
wonderful with the national processing agreement, my district, 
literally, I can order half a truck of fruits and vegetables 
coming to my warehouse. California doesn't see it, doesn't 
touch it. We do everything on ECOS, which, again, is a USDA 
program. But California still charges me a dollar for that 
case----
    Mr. McKeon. How do they find out how many cases you are 
getting?
    Mr. Matustik. Because officially it still has to go through 
the state. There is a state DA----
    Mr. McKeon. So they have a way to find out.
    Mr. Matustik [continuing]. And they know exactly how many 
cases I am getting.
    And if I order a sack of potatoes, they want $2 for that 
sack of potatoes, because they say that really would be several 
cases because the sack of potatoes is, I don't know, 100 pounds 
or something like that.
    I think it is completely ridiculous. I am fighting this for 
15 years. If they are getting $1.3 million--and that is the 
official figure from USDA--for their administrative fund----
    Mr. McKeon. Just for your co-op?
    Mr. Matustik. No, for the whole California, for 
distribution----
    Mr. McKeon. $1.2 million----
    Mr. Matustik. But that is for administrative work----
    Mr. McKeon. What do they do with that?
    Mr. Matustik [continuing]. Half the price. [Laughter.]
    Chairman Miller. That and other questions will be answered 
by the committee in the future. It is sort of like having Tony 
Soprano as your partner.
    Thank you.
    Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman.
    Mr. McKeon said if we could vote on something--we did vote 
on the agricultural bill. And the agricultural bill permits the 
sale of excess sugar for the production of ethanol.
    Mr. Faber, what effect to you think that will have upon 
food prices?
    Right now, also let me ask, where did you get your data? 
Because both the USDA and Department of Energy say that, in 
2007, 3.4 percent of the extra cost was because of the ethanol 
production and, in 2008, 4.5 percent.
    Mr. Faber. Right. Let me take the last question first, and 
I will let USDA explain the discrepancy in numbers that have 
been used.
    But the CEA, Council of Economic Advisors, did an initial 
estimate that attributed 2 to 3 percent of the increase in food 
price inflation to biofuels. And Secretary Schafer said as much 
when he went to the Rome summit on our global food crisis.
    And then, subsequently, the current chief economist at 
USDA, Joe Glauber, put out a significantly higher number. He 
estimated that close to 10 percent of the increase in food 
price inflation could be attributed to biofuels production.
    And separately and apart from that, the recently retired 
chief economist of the USDA, Keith Collins, was hired by a 
third party. And he estimated that food prices would be rising 
23 to 35 percent faster than historically because of our 
biofuels production.
    So I will leave it to you to sort out who is right and who 
is wrong. But, clearly, I think anybody who looks especially at 
the chart on page 3 of my testimony, I think it is fairly 
obvious that diverting 33 or more percent of our corn crop this 
year and 40 percent or more in the next few years is going to 
have a significant effect on the price of corn and, ultimately, 
the price of things made from corn, especially meat products--
milk, meat and eggs.
    The sugar issue, the diversion of sugar from--in the sugar-
to-ethanol provisions of the farm bill will have virtually no 
impact on prices, on the price of fuel. I think much more 
promising opportunities are importing Brazilian ethanol, which 
can be landed in the Port of Oakland, for example, at about $2 
a gallon right now, if we could eliminate the tariff that is in 
place.
    Mr. Kildee. Well, with the production from sugar, which can 
start now under the new farm bill--that is a new provision in 
this year's farm bill--that would put less pressure on corn, 
would it not?
    Mr. Faber. What ethanol refiners tell us and have told you 
is that they don't expect to use much of that sugar in the 
production of corn ethanol or conventional ethanol in the short 
term, but they might use more of it in the coming years.
    Mr. Kildee. And Brazil has been doing this for years, has 
it not, using sugar?
    Mr. Faber. Correct.
    Mr. Kildee. Mr. Leibtag, did you want to comment on that in 
the new farm bill?
    Mr. Leibtag. Well, I agree with the marginal effect at this 
point, in terms of the use of sugar. I think, as I mentioned 
earlier, you know, down the road there need to be more 
solutions. Corn from ethanol is not the only one. But, you 
know, I think everything will help. We just need a number of 
factors to deal with the energy problem.
    Mr. Faber. The other thing that is worth noting is that, 
while a corn ethanol has a net energy benefit of about 1.3 to 
1, sugar ethanol has a net energy benefit of 8 to 1 and poses 
significantly fewer environmental challenges than corn ethanol 
or biodiesel. So it helps address some of those challenges as 
well.
    Mr. Kildee. So that provision of the farm bill could be 
helpful both for our energy problem and our food problem.
    Mr. Faber. Well, it will certainly increase the price of 
sugar and, ultimately, the price of food.
    I don't expect it will do much to reduce the price of fuel 
or the demand for corn ethanol, and here is why: Because of the 
way the energy bill was structured, gasoline refiners are 
required to blend a certain amount of corn ethanol into our 
gasoline supply every year. And that amount is going to 
increase in the next few years to 15 billion gallons. We will 
make about 9 billion to 10 billion gallons in 2008.
    Mr. Kildee. Is it corn ethanol or just ethanol?
    Mr. Faber. It is corn ethanol.
    Mr. Kildee. Corn ethanol.
    Mr. Faber. There is a separate mandate for advanced 
biofuels like sugar and sorghum.
    Mr. Kildee. Well, Congress should probably address that in 
Energy Committee, in light of the fact that the agriculture 
bill now calls for production of ethanol from sugar.
    Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Miller. Mr. Castle?
    Mr. Castle. Thank you, Mr. Chairman.
    Dr. Wilson, let me ask you a question that bothers me. 
Maybe I should know the answer to this, but I don't think I do. 
I am from Delaware. And when I go to our schools, and I am 
thinking particularly of high schools--I have got a couple of 
mine where I saw this--I see the lunches, school lunches in 
this case, which are being served.
    And I don't doubt for a minute that they have nutritious 
things being served, but a lot of the kids are eating pizza and 
other things. We have a problem with weight with our children 
today and nutrition, obviously.
    How does this happen? Is that a local decision which is 
made in terms of what they are going to offer at a particular 
site in terms of a lunch or a breakfast?
    And if we are adopting nutrition programs--I have been 
involved with this legislation before--how does it sometimes 
get into something perhaps less nutritious by the time it is 
actually served?
    If you could help me straighten out my puzzle.
    Ms. Wilson. Well, as far as the reimbursable meal is 
concerned, we all have the same reimbursable meal pattern that 
we need to follow. But what those components are we can choose, 
whether it is pizza or a hamburger or chicken casserole, 
whatever that is for the main entree.
    I think some of the misinformation, though, that is out 
there is that, number one, we are numbers-based. We need our 
customer to come through the line to keep our programs alive. 
And so we try to meet the needs of that customer. And so what 
has happened, even at the food manufacturers, is that we have a 
number of products that we serve in schools that truly are a 
healthy product.
    And you mentioned pizza, for instance. Many times, that is 
a whole grain crust, maybe even a whole wheat crust. It might 
be low-fat pepperoni, low-fat cheese. So there are products out 
there that we have an idea in our mind that that is not such a 
healthy product but, in essence, it really is, when we look at 
the different ways we purchase in schools and the products we 
are getting through the school system.
    The other thing we look at is that, if that child likes to 
eat a piece of pizza, number one, we are portion-controlled. So 
that piece of pizza is not half a pizza. It is a single piece 
of pizza. It also comes with milk, vegetables and fruit. And so 
there is a whole, complete meal there.
    And really what we are trying to do is teach children to 
eat----
    Mr. Castle. Pardon me. Do you think they take and eat the 
milk, vegetables and fruit?
    Ms. Wilson. You know, we really try to encourage them. Do 
they eat it? Not always. But, for instance, in our district 
where at our high school we serve pizza, but we have a full 
fresh fruit and vegetable bar that is included with the meal. 
So that child can go through, get a piece of pizza, and then 
they can go through and take all different choices of fruits, 
vegetables, and then of course their milk. So, you know, what 
we try to do is definitely encourage the children to do those 
things.
    One of the things, though, that, now that you brought it 
up, one of the things that we know that is still lacking is 
nutrition education. I have talked to students all across this 
country that say, ``Look, you are putting all these standards 
on us, but you are not telling us why. You are not explaining 
to us how to put that meal together. You are not giving us the 
opportunity to be educated in nutrition.''
    And when you look at it, even though wellness policies were 
required to look at nutrition education, there was no type of--
there is nothing strong there that says to schools, ``You must 
have nutrition education K through 12,'' or, ``You must have 
something that is science-based that teaches kids about 
nutrition,'' not whatever anybody thinks about the latest diet 
fad, but real nutrition education. It is definitely lacking in 
the school system.
    Mr. Castle. Well, sometimes I think it is just a matter of 
will. I think, Mr. Chairman, we ought to have a committee 
hearing in which we set up a lunch here and bring in about 10 
of these high school kids and let them choose what they are 
going to eat. I think we might be surprised at the lack of 
nutrition that we see there, to a degree there, in terms of 
choices.
    I don't know if we can address that. I mean, there are 
local decisions on that. But it is concerning.
    At the risk, Mr. Faber, perhaps of a local advertisement 
here, I would like to ask you questions about the cellulosic 
research which goes on. The reason I say ``local'' is because I 
am from Delaware and the DuPont company is doing a lot of this.
    Looking at other growth areas, if you will, they are 
looking at the husks of corn and the stover of corn, the 
cornstalks, as well as switchgrass and other things that are 
being looked at.
    Do you have any sense of the state of that research in the 
country today? I mean, I don't know how much all of this is 
influencing the cost of corn and soybeans, but it clearly is. 
The bottom line is that there may be easier and less expensive 
ways of doing this.
    Mr. Faber. Absolutely. Clearly, the most promising solution 
to the impact of our food-to-fuel policies on food prices is 
getting these second-generation fuels, cellulosic biofuels and 
advanced biofuels, to commercial scale as quickly as possible.
    And it is important to remember that it took corn ethanol 
30 years and an extraordinary level of government support to 
get to its first 2 billion gallons. And when I talk to my 
colleagues who are in the business of developing these second-
generation fuels, they expect to produce their first 2 billion 
gallons sometime between now and 2014.
    So there is extraordinary promise there. I think that it is 
sort of a race, in some sense, to identify the most cost-
effective, most easily commercialized fuel that can take 
advantage of existing infrastructure. One of the challenges 
with corn ethanol, as you know, is you have to rail it or put 
it in a barn.
    So there are great opportunities there. There are things 
that Congress can do to really accelerate the development of 
those second-generation fuels, in particular: looking at ways 
to accelerate the mandates that are in place for cellulosic; 
changing the tax credits that go to the refiners of gasoline to 
make it more attractive for oil and gas refiners to blend 
cellulosic and advanced biofuels into their fuel supplies; and, 
again, reducing the tariff.
    You know, the real opportunities to produce a lot of these 
cellulosic biofuels are not necessarily in Delaware or in 
California. They are in equatorial regions of the globe where 
you can get multiple harvests in a single year and then ship it 
to take advantage of our market and E.U. market and so on.
    So we really need to be looking globally as we think about 
how to get these second-generation fuels online to take 
pressure off the conventional biofuels that are driving up food 
prices.
    Chairman Miller. Thank you.
    Mrs. McCarthy?
    Mrs. McCarthy. Thank you, Mr. Chairman.
    Mr. Harnett, in your testimony you mentioned that Nassau 
County--and I am sure this is happening in counties all over 
the country--that they are subsidizing your particular program, 
summer program, by 21 percent?
    What concerns me is--we have a very diverse community in 
Nassau County. We have some of the wealthiest people probably 
in the country, and then we have some of, unfortunately, the 
poorest people. And I knew our food banks. Every church had a 
food bank. We have our own food banks. And yet those shelves 
now are being empty.
    So the children that you are getting--and I am sure this 
probably works with some of the other areas around the country. 
What concerns me is that the food banks aren't getting out food 
to the families as they pick them up for the weekend or the 
evening meals. It comes back to whether our schools or whether 
programs like yours are the only areas where the children are 
actually getting fed.
    And, Dr. Wilson, I guess one of the others things, too, 
that I am concerned about, in my underserved schools they don't 
have too many kids paying for their lunches. And unfortunately 
they probably serve the worst lunches. Now I am going into all 
my regular schools, and less and less of them are going to be 
buying lunches, so they are not going to be able to subsidize 
the children that need the free lunches.
    So with that, the problems that we are facing, to me, seems 
that it is something that this committee really needs to work 
on and certainly Congress needs to work on. Because if we don't 
have healthy children, we are not going to have a healthy 
future.
    When the pediatricians start talking about putting children 
on cholesterol medication at age 8, that is a sign of the 
times. And we are seeing more and more children with diabetes 
in our society. So, again, it comes down to the basics. And 
that is programs like yours.
    What are you going to do if Nassau County or any other 
county that is supplying or helping our programs to feed our 
children--they are going to go through tough times too. It is 
down the road.
    Mr. Harnett. Well, there is no question that everyone is 
going to be challenged in a similar way. I mean, we all 
participate. Thirty-nine different programs in the county 
participate in the county program, so that we can get whatever 
economies of scale we can and the best possible prices. There 
is no question, as other speakers have mentioned, that 
nutrition is the key. And it is nutritional education.
    Kids are kids. They like food that tastes good. And they 
are surrounded by food that tastes good that is not good for 
them. And, on the other hand, we know that if the children are 
given good-quality food and they learn the benefits, they will 
do better. There is no question about that. But it is a major 
effort.
    We also have to remember that the families that are trying 
to raise these children are struggling. Both parents are 
working. They are away from home large parts of the day. They 
are counting on these programs to give the children their basic 
nutritional meal of the day. Families are working longer and 
longer hours.
    So, without these programs, the children's nutrition will 
suffer. We will all struggle to try and come up with ways to 
try not to diminish the nutritional quality of the meals but to 
add more money there at the price of the other kinds of things 
we do with these programs.
    The point of these programs--the nutritional part of them 
is only one component of the program. We are trying to get 
children involved in more creative learning activities so they 
are not on their own after school, they are not involved with 
other kinds of activities that are high-risk behaviors and 
ultimately will be much more detrimental.
    We all know, the bigger the investment we put in the 
children at their earliest years, the better the payback.
    Mrs. McCarthy. And I agree with you on that, because I 
think that the coalition of our underserved schools, you know, 
where we certainly want to bring the best education to them, 
are usually the children that do not have the best nutrition. 
And as you said earlier in your testimony, if you don't have 
the fuel to do the energy, you are not going to be able to do 
well in school.
    So, we have a long way to go in this country. Thank you.
    Mr. Harnett. I couldn't agree more.
    Chairman Miller. Thank you.
    Mr. Keller?
    Mr. Keller. Thank you, Mr. Chairman.
    I want to thank all our witnesses for being here.
    I listened carefully to all your testimony and read your 
written remarks, and it seems like there is a consensus, from 
most of your testimony anyway. And it seems like the bottom 
line is that high gas prices, along with ethanol mandates and 
tariffs, are killing us, in terms of higher food costs.
    The solutions are pretty simple, although they are not 
politically easy. And the simple solutions, in the interest of 
straight talk, are these: We have got to drill for oil 
domestically. We have to axe the tariffs on biofuels. And we 
have to quit wasting $40 billion a year in agricultural 
subsidies and price supports.
    That is the truth. And it takes a lot of political will to 
do that. And I certainly would support everything I just said. 
But that is the truth.
    I want to focus my remarks a little bit on childhood 
obesity, and it certainly is a serious problem. Two out of 
three adults in this country are overweight; one out of three 
children are overweight. Childhood obesity rates have tripled 
since 1980.
    And we know the solutions, according to the experts who 
have testified before this committee--pretty simple and 
straightforward. Every child should have a healthy breakfast. 
Every child should exercise, one day, outside activity. Every 
child should have at least five servings of fruits and 
vegetables, hopefully nine. Those are the three common-sense 
things. And that tailors with the USDA guidelines.
    One of the things that I have heard over and over today is 
that the high cost of fruit and vegetables is a concern. And I 
stipulate that to a point. I mean, it is obviously a lot more 
expensive for poor folks to buy apples and bananas and lettuce 
and fresh green beans than it is to buy a package of macaroni 
and cheese or rice. And so we see obesity rates a lot higher 
among poor folks.
    But what I am interested in--and I will begin with Ms. 
James--is whether some of the local school districts are making 
the same type of choices that I do when faced with high food 
prices.
    I am someone who eats 10 servings of fruits and vegetables 
every day. I am sold on that concept. But my favorite 
vegetable, for example, is green beans. And back when times 
were great, I would go to my local public grocery store and go 
to the produce section and buy a package of fresh green beans, 
which are $2.99, and I would put them in the microwave.
    Now I go to the same store and I buy a can of green beans, 
which are 99 cents and have the same volume and, according to 
my nutritionist, roughly the same nutritional value. And so, 
instead of paying $3, I pay $1. I would prefer to have the 
fresh; they are a little crunchier, a little better. But 
nutritionally, not a substantive difference.
    Do school districts, Ms. James, make the same type of 
choices and use, say, canned green beans versus fresh green 
beans when the prices become exorbitant?
    Ms. James. Well, first of all, I am not a school district, 
so I am going to defer that question to some of the school 
people. But I can speak for the child-care community. And one 
of the things that I know is that, clearly, for child-care 
centers, they are buying canned vegetables because they are 
cheaper.
    But what I also know is that they are typically buying in 
places like Costco and Wal-Mart, where they can buy ``number 
10'' cans, whatever--I think the school district could tell me 
better what that is. But the varieties that they are able to 
purchase, in terms of what the stores offer, is significantly 
less and lower quality than that of what they could purchase if 
they were buying fresh fruits and vegetables.
    Mr. Keller. Thank you.
    I will switch to, okay, Ms. Wilson. When times are hard, 
would your district be more likely to buy the cans of green 
beans versus the fresh green beans?
    Ms. Wilson. At this point, no. And I have talked to a 
number of different district directors around this country, and 
what we are doing is really assessing our programs. We are 
looking at paper products. We are looking at the way we do 
dishes. We are looking at everything possible before we get to 
the food issue. That may mean cutting labor, though, as well, 
and cutting our labor force.
    Mr. Keller. Well, the obvious question is, why not?
    And I will certainly point you to the most famous 
nutritionist in the country, Dr. Barbara Rolls at Penn State. 
They say frozen vegetables and canned vegetables have equal 
nutritional value to the fresh.
    And if you are not using that, which would save you 67 
percent on your food costs, why the hell not?
    Ms. Wilson. Well, we use a combination of things. I mean, 
we have fresh and canned out every day, because the children 
like choices. There are some children that like canned fruits 
and vegetables; that is just what they like to consume.
    Mr. Keller. Right.
    Ms. Wilson. And you are absolutely right. The nutritional 
value is, you know, very, very close. With canned vegetables, 
you have a sodium issue that you have to take a look at in 
school districts. But otherwise, what we see are school 
districts using a combination of both.
    Mr. Keller. Okay.
    Ms. Wilson. But to eliminate fresh for no reason--one of 
the things we are trying to do is teach kids where food comes 
from. So----
    Mr. Keller. Well, you are right. And some of the canned 
vegetables are low-sodium, as well.
    Ms. Wilson. Right.
    Mr. Keller. I can tell you from personal experience, having 
had the can with no sodium, it is horrible. I don't know why. 
[Laughter.]
    But I would just rather have the salt for myself.
    But my time has expired. And I will yield back, Mr. 
Chairman.
    Chairman Miller. Thank you.
    Mr. Scott?
    Mr. Scott. Thank you, Mr. Chairman.
    Dr. Wilson, you represent organizations all over the 
country. Are they experiencing the same increases in total 
costs for food?
    Ms. Wilson. Yes, sir, they are. If you go on to our school 
nutrition Web site, almost daily we have 10, 20 different 
districts reporting in that the same issue is impacting 
everybody across the country.
    Mr. Scott. And are the total costs the same, or is there a 
variation of costs around the country for the cost of a 
nutritious meal?
    Ms. Wilson. Well, I think they have done an average, but of 
course it is somewhat different depending upon the region. You 
know, even as far as what the season is, in northern Wisconsin 
or northern Minnesota, it is going to cost you a lot more than 
southern California to obtain fresh produce. But the average is 
$2.88 to $3 nationwide.
    Mr. Scott. Are some much above average and some much below 
average?
    Ms. Wilson. I don't know of any that are really below 
average. I mean, I think--grossly below. I mean, you know, a 
lot of them are grossly below average. I mean, I think people 
are pretty clustered into that. You might have a fluctuation of 
about 40 cents back and forth.
    Mr. Scott. Ms. Houston, the free lunch is still free, is 
that right?
    Ms. Houston. That is correct.
    Mr. Scott. And the reduced cost, the increase in cost in 
the food does not affect what those on reduced lunch will pay?
    Ms. Houston. By law, schools are not allowed to charge more 
than 40 cents per meal to a family that qualifies for a 
reduced-price meal.
    Mr. Scott. And if the costs go up, what does the full-pay 
student pay?
    Ms. Houston. That will vary depending on the school 
district. The school district is in a position and has the 
discretion to set the price that they charge for children who 
do not qualify for a free or reduced-price meal.
    Mr. Scott. Now----
    Ms. Houston. Our most recent data that we have available 
shows that, for the 2005-2006 school year, on average, school 
districts charged about $1.60 for a paid meal.
    Mr. Scott. Do most of them pay the actual full cost, or do 
they just pay a reasonable amount?
    Ms. Houston. USDA subsidizes the cost of all meals, 
regardless of whether they are free, reduced or paid.
    Mr. Scott. And has the higher cost resulted in many 
students electing not to get lunch?
    Ms. Houston. Well, in fact, our data suggests that the 
reimbursement that USDA provides for the paid meals is actually 
helping to offset the charges that schools are passing along to 
families of children who are not eligible for the free and 
reduced-price meals.
    Mr. Scott. So you are not experiencing fewer children 
getting lunch as a result of the higher prices?
    Ms. Houston. Our projected estimate for the 2009 school 
year is that participation rates will increase about 1.5 
percent.
    Mr. Scott. And that is the increase in student population?
    Ms. Houston. That would account for increase in student 
population, as well as what we anticipate the increased use of 
the program would be.
    Mr. Scott. Now, is there any evidence that the LEAs are 
affecting their menus as a result of the higher prices?
    Ms. Houston. That will vary around the country, depending 
on the LEA of which you speak.
    We have certainly tried to provide technical assistance to 
help school districts identify ways in which they can economize 
to manage their very tight resources. A tip sheet that we 
recently put out helped schools to think about ways that they 
can improve their meal service without compromising nutritional 
quality.
    So there certainly are some strategies that can be 
employed, both on the ways in which they procure food as well 
as looking at ways in which they can increase program 
participation, and also examining opportunities to increase the 
revenue streams coming into the school food service.
    Mr. Scott. Now, have the summer programs, the Head Start 
and the daycares, have they been affected by the higher prices? 
And how are they affected?
    Ms. Houston. I think it is fair to say that, generally 
speaking, across the board, families at home as well as in 
institutional settings--schools and child care and the like--
everyone is working to try to identify ways in which they can 
make the most effective use of the resources that they have 
available, recognizing that food costs have increased.
    Mr. Scott. And students benefit from food banks. How have 
commodities going to food banks been affected? Have you 
increased or decreased the number of commodities going to food 
banks?
    Ms. Houston. We have a very strong partnership with our 
food banks. The TEFAP program provides some support to food 
bank operations. We have an ongoing commitment through 
appropriations to provide a level of funding that has recently 
been increased in the farm bill up to $190 million a year.
    We also, when we have available, provided what we call 
bonus commodities to food banks. Because the agricultural 
markets have been strong, we have had less bonus commodities 
available to donate. But when we do have them, we do make them 
available.
    Mr. Scott. Am I hearing that the local food banks are 
getting less from the federal government than they have been 
getting in the past?
    Ms. Houston. That is correct. In the past year, we have had 
a decreasing amount of commodities available.
    We are working to employ some strategies to try to offset 
that reduction in commodity donations, however. One of the 
strategies we have put in place is the program we are calling 
``Stocks for Food.'' The federal government is taking what we 
have had warehouses of, raw commodities, and bartering them in 
the marketplace for value-added products that we are then 
donating to food banks. And that is helping to ease some of the 
challenges that food banks have had.
    It is also important to recognize that, in addition to our 
child nutrition programs and the important work that the food 
banks have, we also strongly encourage and working very hard to 
make families aware that they may qualify for the Food Stamp 
Program.
    The Food Stamp Program provides ongoing benefits to about 
27 million individuals every month. And depending on your 
income requirements, we provide a cash-value benefit that 
families can then use to purchase food in the grocery store.
    Mr. Scott. Thank you.
    Chairman Miller. Thank you.
    Ms. Woolsey?
    Ms. Woolsey. Thank you, Mr. Chairman.
    First of all, I apologize for not being here for the entire 
hearing. We have a hearing on Iran going on across the hall. So 
it is a push-me, pull-you day. But, you know, I felt sure I 
agreed with the need for more food for all of our children. So 
I didn't feel like I needed to come here and be convinced of 
that.
    Mr. Harnett, in my district, and all over the country I am 
sure it is true, because of rising food costs and the expanded 
demand for food for populations in our communities, the 
Community Action Partnership of Sonoma County, which is located 
in Santa Rosa in my district, had more children show up on the 
first day of the summer meals program than they had meals to 
feed them. Actually, 40 children were unable to get meals that 
day. So they watched others eat while they didn't have 
anything.
    So my question to you--Ms. Houston responded, but I am 
going to ask you to respond about summer food programs that are 
already struggling, with decline in participation and high 
administrative costs. How have the rising food prices impacted 
your participation in summer programs this year?
    Mr. Harnett. Well, I think I am happy to say, at least as 
of yesterday, every child that showed up in our county did 
receive a meal and is participating in a program. But I realize 
that not every county is in that position. So there are always 
going to be these tradeoffs that people are going to make.
    Programs that are smaller, faith-based organizations, they 
are going to drop out of these programs. And the problem is the 
children will not only get the meal, but they won't get the 
activities that these programs provide, so it is a double 
whammy. The children then are unsupervised. They don't have the 
activities that they should.
    I agree with the congressman's point that the children need 
to be more physical. We are competing with PlayStation and 
other games that they will play endlessly. They have got to be 
out there exercising. And that is what these programs do. They 
are structured, they are creative, they challenge the children 
both in mind and body. And that is what we need.
    So it is a terrible thing if we are not pushing these 
children and involving the families to the extent we can so 
that they do learn better activities and better nutritional 
values. It is not just the food, as important as that is.
    Ms. Woolsey. Well, okay, that is right. It is not just the 
food and it is not just having food. It is nutrition that goes 
along with that.
    So, Ms. Houston, we have to make sure that every child is 
given access to food that meets sound nutritional standards. I 
was sitting here thinking, having just come across the hall 
from International Affairs, we have had hearings where we have 
heard that children in Africa eat dirt just to have something 
in their stomachs. I mean, we aren't doing that in the United 
States of America, but it does us no good to fill them up with 
food that is not nutritious, and we know that, even though some 
of it could be less expensive.
    So I have introduced, along with Senator Harkin, H.R. 1363, 
the Child Nutrition Promotion and School Lunch Protection Act, 
which seeks to ensure that all foods sold in schools during the 
entire school year, including summers, is based upon current 
nutritional science.
    And so I am concerned that the rising food prices may 
reduce, actually, or loosen nutritional standards. What is your 
experience in that regard?
    Ms. Houston. Let me just start by saying that we strongly 
support efforts to try to increase participation in the summer 
feeding program. We serve, on average, about 31 million school 
lunches a day but only about 3 million meals during the summer 
months. So we believe that there is a strong need to try to 
identify ways in which we can not only increase child 
participation in the programs but also increase the number of 
sponsors that are willing to operate sites where children can 
get access to healthful meals during the summer.
    We also have some interesting research that suggests that 
childhood obesity rates can actually go up during the summer 
because children don't have the same kind of structure they 
have during the school year.
    In terms of the nutritional quality, the meal pattern 
requirements that are required for the school meals during the 
school year also pertain to the meals that are served in other 
non-school-based programs. So we work very hard to try to 
encourage the summer programs, for example, to serve fruits and 
vegetables, whole grains, et cetera.
    It is a challenge and cost to affect their ability to do 
that. But I think, as we have been talking about cost, food is 
just one aspect of the cost of operating these important 
programs. And there are strategies that we can put in place to 
try to help maximize the use of the resources available and see 
how we can make the most effective use of what is available to 
serve the most healthful meals we can for children.
    Ms. Woolsey. Thank you.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you.
    Mrs. Davis?
    Mrs. Davis. Thank you, Mr. Chairman.
    And I am sorry that I missed your testimony, but perhaps if 
this kind of question was asked you can let me know, but I am 
really looking a little bit more specifically.
    San Diego is my home district, and it is a very high-cost 
area, as you probably know. And so the recent rise in food 
prices has really hit our community hard. I know that 
Congresswoman Woolsey mentioned the lunch programs during the 
summer, and they have seen an overflow crowd at those centers. 
And so we are certainly experiencing those same issues.
    Does the calculation for the federal reimbursement rate for 
the school nutrition program take into consideration cost-of-
living differences between different parts of the country? And, 
if not, do you think it should? Would you support factoring in 
those cost-of-living differences?
    Ms. Houston. Our current reimbursement rates provide an 
additional subsidy for Hawaii and Alaska, but within the 
contiguous United States there are not differences in the 
reimbursements rates.
    We have certainly looked at this issue in the past, and we 
will continue to look at it, but there are so many factors that 
affect the cost of different types of foods in different 
geographic locations that it would be quite a challenge to 
identify how best we would go about making adjustments to those 
reimbursement rates.
    Mrs. Davis. You might look at the services, because they 
try to do that for families. And that might be a way of 
assessing, to the extent to which that is an issue.
    I know that in the area, cost of producing a meal now is up 
20 percent, from $2.47 to $2.97. And an increase in the cost to 
produce a meal will increase program costs by an additional 
$35,000 per day, or $6.3 million over the 180 days in the next 
school year.
    So those are sizable numbers, and people are looking for 
some relief in that area by region. And so I would hope that 
they might take a look at this. I think there is a way to 
assess that. And I know it is always a push-pull, in terms of 
who gets included and who doesn't. But, in fact, if we are 
treating children differently by virtue of the fact that they 
are not able to produce those meals as well in some 
communities, I think that is a factor to look at.
    Anybody else want to comment on whether you think that is 
an exercise that is worth doing, that we should look at, at 
least to know those differences?
    Ms. Wilson. I would just like to make a comment that 
especially in labor costs, it is very different around the 
country as to what the cost of labor is in our school systems. 
And so that is another thing that would be very beneficial to 
be factored into that.
    Mrs. Davis. Yes.
    Ms. Houston. I think it is also worth mentioning that the 
food costs also are impacted by the types of strategies and 
effective use of procurement practices from one school district 
to the next, and also the amount of participation.
    So certainly the ability, such as what is happening in Mr. 
Matustik's district, he is able to receive a lower price for 
foods because of the sophisticated way in which he has been 
able to set up his volume purchasing.
    So there are some practical ways in which we can provide 
training and technical assistance to school food service 
operators that might help them lower the prices even in areas 
where geographically they may be paying more for certain types 
of foods.
    Mrs. Davis. Are you all doing that now?
    Ms. Houston. We are. In fact, this summer we are about to 
release a series of Web-based modules for school food service 
that will help them in improving their ability to make 
procurement decisions. We have a number of modules. One of the 
modules will discuss the co-op system and other ways in which 
we can make those practices----
    Mrs. Davis. I would agree, that kind of information-sharing 
is important. But, on the other hand, there are some other 
issues that perhaps the greatest efficiencies in the world will 
not answer if we don't get a handle on that.
    Just really quickly, have you recommended linking the 
inflation adjustment in the school nutrition program to the PPI 
instead of the CPI, Producer Price Index instead of the CPI? Is 
that an issue that you all have looked at? And what merit do 
you think that would have?
    Ms. Houston. I am going to turn this over to my colleague, 
Dr. Leibtag, in a second. But we are required by law to use the 
Consumer Price Index food-away-from-home series. So that is not 
a discretion that the department has at this time, in terms of 
making a change to what index we are using.
    Dr. Leibtag, you may want to comment on why that particular 
index has been used in the past and whether or not it is the 
appropriate index.
    Mr. Leibtag. Given that we are trying to cover the final 
cost of the lunch on the tray, that is why the CPI is the most 
appropriate. It is a measure of retail prices for food items.
    Producer Price Index is looking at earlier stages of 
production. It measures what I would call wholesale prices, 
which are definitely relevant to the food service sector but do 
not approximate the changes in the final retail cost.
    Just as an example, one of the big distinctions is between 
a wholesale commodity-level price and a final retail price, and 
that includes labor and services. And that is kind of the 
biggest distinction between wholesale and retail.
    Mrs. Davis. All right. Thank you.
    Thank you, Mr. Chairman. My time is up.
    Chairman Miller. Thank you.
    Mr. Hinojosa?
    Mr. Hinojosa. I want to thank the panelists for coming to 
brief us and explain to us the situation.
    I am going to start my questions with Kate Houston.
    And I have seen here, in the last few months, where there 
was a big recall of ground meat. And it was in the millions and 
millions of pounds. And they had been sent out to further 
processing companies, where they would take a load of 40,000 
pounds of ground beef and make it into charbroiled beef 
patties. And they had already been received. They were in 
storage ready to be further processed, and they had the recall, 
and so that put a stop on that.
    And Houston Independent School District and Dallas and 
those schools were expecting to get the charbroiled patties but 
they couldn't receive them. And that added to their, I guess, 
frustration, that they didn't have meat coming in when it was 
scheduled.
    And what do you do to reimburse those school districts? 
Because they had to get it at a much higher price from some 
distributor like SYSCO or some of those that are available to 
them? How do you reimburse that school district for the 
additional cost?
    And the next question is, since gasoline has gone up, which 
adds to the transportation cost--I saw the IRS upped the 
allowance for using your automobile to do official work from 50 
to 58.5 cents. I am sure that school districts get contracts 
that have a paragraph that says that, should distribution costs 
go up, they are allowed to increase the product cost before 
they deliver it.
    What are we doing in the federal government to help those 
school districts?
    Ms. Houston. I will start with the Hallmark-Westland recall 
issue.
    We have committed publicly that we will reimburse schools 
for all reasonable expenses related to the hold and recall of 
the beef. We are in the process of working with the state 
agencies to whom we provide the reimbursement. And, to date, we 
have provided about $12 million back. As soon as those bills 
come in from state agencies, we are turning them around and 
getting that money back out as quickly as possible so they can 
distribute it appropriately to schools.
    We worked very hard after the recall to give schools the 
option of either getting them replacement product as quickly as 
possible or providing them a credit toward their commodity 
account that could then be used for the next coming school 
year, recognizing the timing of the school year in which the 
recall happened, and that some schools preferred to then re-
menu at a later time.
    On the gas prices, you know, I can't speak to the 
individual types of contractual arrangements that school 
districts have made for the purchase of food that they have 
used, their cash portion of their reimbursement.
    However, I can say that we are providing technical 
assistance to both state agencies and schools to try to help 
them identify procurement practices that will make the most 
sense for maximizing the use of the reimbursement dollars that 
they have available and to get the lowest unit price for the 
product.
    Ultimately, those are local decisions, in terms of what 
contracts are entered into, so long as they are made in 
accordance with government procurement practices.
    Mr. Hinojosa. My time is running out. Now that you have 
explained that part to protect the state and the school 
district, let's talk about the processor, the manufacturer that 
does processing for a fee.
    They are having double problems. One is they receive the 
product, they have got expenses and the warehouses, and now 
they are having to send it back. And then the other problem is 
that the gas and electricity costs have suddenly skyrocketed.
    And I had this processor in Harlingen, Texas, say that the 
bill that they had on the gas that is used to fuel the 
charbroiled cooking had gone up substantially. I don't remember 
the exact figures, but it was way out of line. And they are 
saying that it is because the crude oil has gone up so much and 
then all these people who have gotten into the market to invest 
for their pensions and other factors that have gone into 
possibly explaining why crude oil has gone to $140.
    What are we doing in Congress to help them out? And they 
are talking about possibly going out of business because they 
just cannot process what they said they were going to process 
back 4, 6 months ago when the bids were out. So these are 
small-, medium-sized businesses. Are we doing anything to help 
them out?
    Ms. Houston. Again, I think as we have heard from a number 
of the witnesses today, there are a variety of factors, 
including gas prices, that are contributing to the overall 
bottom line and challenges that both schools and the processors 
that serve the schools face.
    We are working to identify ways in which we can try to help 
schools manage their underlying costs in a manner that can try 
to offset some of the challenges that they are having because 
of the increased cost of food.
    In terms of the processors, again, those are arrangements 
that are, generally speaking, entered into between the school 
food service and the processor. And in some cases, those 
processors are working with our commodity entitlement program.
    Mr. Hinojosa. Would you agree with me that we have lost a 
lot of small-and medium-sized processors in the last 7 years?
    Ms. Houston. I don't have any data on that today. But we 
would be happy to look into it, and I can provide it to you.
    Mr. Hinojosa. Thank you, Mr. Chairman.
    Chairman Miller. Thank you.
    If I might ask one question, Ms. James, you mentioned 
Antioch and Pittsburgh and Concord. Those three communities--
maybe to a lesser extent Concord--appear to be pretty heavily 
impacted by mortgage foreclosures. Do you see this reflected in 
participation by students in the program? Does that play out in 
any way, when you are talking to your different constituents?
    Ms. James. It certainly, from the child-care perspective 
and family child care, certainly we have seen a number of 
family child-care businesses that lost their business because, 
in fact, their homes were foreclosed. So from the business 
perspective.
    But then in terms of the children, certainly it has 
impacted, you know, their, sort of, quality of life, their 
stability in life and where they have been forced to move to.
    So it is really, sort of, a different answer to your 
question, but clearly we have seen a dramatic change in, sort 
of, the income eligibility levels for individual families 
participating in the child-care food program.
    Chairman Miller. Thank you.
    Thank you all very much for your participation this 
morning. Obviously, this isn't an issue that is going to be 
settled in this committee room this morning. And it also plays 
out in the reauthorization next year.
    But I hope that we might be able to continue this 
conversation, because I think that most of the economic 
forecast suggests that it is going to be fairly rough sledding 
for the American economy. We had both the secretary of treasury 
and the chairman of the Fed yesterday suggest to us that this 
was going to go deep into next year.
    And I think some of the recommendations you made here this 
morning for immediate consideration, some that you made for 
consideration in the future, we will start to pore over.
    But we would like to keep our hand here, because obviously 
we want to do whatever we can to make sure that the children 
can participate and that they are participating in a quality 
program. But we appreciate all of your inputs here.
    Let me just say, Mr. Matustik, you looked like you had 
something you wanted to say here as all these people were 
commenting about the cost of the program. I don't know if you 
just want to----
    Mr. Matustik. Yes, I did. I mentioned it in my 
presentation, my summary. I think it is not right if we don't 
charge pay kids the same, if we don't bring that fee on the 
same level of what the reimbursement rate is. I call it the 
reverse Robin Hood. We cannot feed the kids from better-to-do 
families on the backs of kids who really don't have any 
resources.
    And that is why I always have a hard time with people 
coming and asking for more resources until in schools we bring 
it to at least a similar level. You know, there is no excuse if 
the district is charging $1.20 for lunch or a $1.60 when I am 
getting from the USDA, from the federal government, $2.54. I 
mean, who is going to cover the difference? It is the quality 
of food or the amount of food we serve.
    So I think that is a very important fact we should look 
into.
    Chairman Miller. Well, thank you.
    Thank you again.
    And, with the adjournment of this hearing, this is the 
100th hearing that this committee has had since I have had the 
honor to become chairman. I didn't realize we had had that many 
hearings, but we are working on it here.
    And, without objection, all members will have 14 days to 
submit additional materials and questions for the hearing 
record.
    And, without objection, this hearing is adjourned.
    And, again, thank you to the witnesses for your time and 
your experience, and to the members for their participation.
    The committee stands adjourned.
    [Additional submissions from Mr. Miller follow:]
    
    
    
    
    
    
    
    
    
    
    
    
                                ------                                


 Prepared Statement of Connie Tipton President and CEO, International 
                        Dairy Foods Association

    Chairman Miller and Ranking Member McKeon: Thank you for holding 
this important hearing on the impact of current milk and food prices on 
the Child Nutrition Programs of the Department of Agriculture (USDA).
    Our organization represents companies who process, manufacture and 
distribute 85% of the milk, cheese, and ice cream products consumed in 
the U.S. The role of milk and dairy products in USDA nutrition programs 
is critical to establishing healthy eating habits that comply with 
dietary guidelines. As the price of milk has increased to record levels 
over the past year, we are concerned about the impact this will have on 
school food districts and the children they serve.
    Milk has played a prominent role in schools for over 65 years, when 
our government first started subsidizing milk in schools under the 
Special Milk Program (SMP). The SMP expanded nationally in 1955 and was 
available to all schools and child care institutions until 1981. Today, 
milk is a required component of the National School Lunch program. The 
SMP is also still available in schools and institutions that do not 
participate in USDA meal programs.
    A combination of fuel, feed, and increased global demand have 
driven milk prices to all time highs. Increased energy costs play a 
critical role--as milk must be transported to processing plants daily, 
where it is pasteurized, packaged, and transported to schools, stores, 
and outlets across the country.
    An outdated government milk pricing system also contributes to the 
cost of milk. USDA recently increased the cost of beverage milk in 14 
states throughout the Southeast and is currently considering another 
proposal to raise these prices nationally.
    While many factors impact milk consumption--one of the major 
problems in schools is the proliferation of alternative, less healthy 
beverages. We are concerned that with current high milk prices, some 
school districts are expanding their offerings of these less 
nutritious, non-milk beverages.
    Only one nutrition program at USDA has a reimbursement rate that 
has kept up with milk prices. Every year USDA adjusts the reimbursement 
rate under the Special Milk Program to reflect the Bureau of Labor 
Statistics' index of producer prices for fluid milk. This adjustment 
allows the SMP to achieve its goal of subsidizing the price of milk for 
students so they do not have to pay full cost for a la carte milk. 
Expanding the Special Milk Program reimbursement to all schools would 
greatly alleviate the pressure of increased milk prices and should be 
considered during the reauthorization of the Child Nutrition Act.
    We have seen announcements from school districts across the country 
that many will raise the price of a la carte milk during the 2008/2009 
school year. We are concerned that if milk prices continue to rise, 
this trend may continue and could negatively impact milk demand that is 
sold in schools. Currently, only about half of eligible school age 
children in the United States have access to milk under a USDA 
sponsored nutrition program. This is a challenge your Committee can 
address during reauthorization of the Child Nutrition Act.
    Government health statistics indicate that almost 90% of girls 
don't meet their recommended intake of calcium, while about 70% of boys 
fall short of the calcium recommendation.\1\ Milk and most dairy 
products provide nine essential nutrients, including three of the five 
nutrients identified as ``nutrients of concern'' for children in the 
2005 Dietary Guidelines for Americans--calcium, magnesium and 
potassium.\2\ Comparing cost to other foods, milk and dairy products 
such as yogurt and cheese are nutrient-dense, providing a wide variety 
of nutrients for the investment. The nutritional value of milk and 
dairy products in schools, not cost constraints, should be the primary 
consideration in USDA's nutrition programs.
---------------------------------------------------------------------------
    \1\ Centers for Disease Control and Prevention (CDC). National 
Center for Health Statistics (NCHS). National Health and Nutrition 
Examination Survey Data. Hyattsville, MD: U.S. Department of Health and 
Human Services, Centers for Disease Control and Prevention, 1999-2002.
    \2\ Dietary Guidelines for Americans, 2005 (6th ed.). U.S. 
Department of Health and Human Services, U.S. Department of 
Agriculture. www.healthierus.gov/dietaryguidelines.
---------------------------------------------------------------------------
    We look forward to working with you and all members of the 
Committee as you consider improvements to USDA's Child Nutrition 
Programs. Please call on me, or members of the for any additional input 
we can provide to help you during this process.







                                 ______
                                 
Hon. George Miller, Chairman,
House Education and Labor Committee, Rayburn Building, Washington, DC.
    Dear Mr. Chairman: I would like to congratulate you for conducting 
the 100th hearing as Chair of the House Education and Labor Committee. 
This particular hearing on the school nutrition program comes at a 
critical time as there is critical information relative to food 
inflation in Puerto Rico which Governor Acevedo Vila felt it was 
important for you and the Committee to have for the record.
    The Commonwealth administers the Puerto Rico public school system 
for over 600,000 students in 1,500 schools spread across the island. 
Our school lunch and breakfast strives to exceed the nutritional 
standards of the USDA and historically Puerto Rico has financed over 50 
percent of the school lunch and breakfast program from our own 
resources. We have worked to increase reliance on local produce and we 
have been able to reduce staffing levels by over 1000 positions in an 
effort to hold down nutrition program costs.
    In examining the inflationary trends of key elements of our school 
nutrition program, the history of the past 6 months suggests that our 
school lunch program is going to be facing significant challenges in 
the next school year. While we appreciate and understand the 4.3 
percent increase in reimbursements by USDA, your hearing clearly 
highlighted the fact that challenges to schools in Puerto Rico and 
across the country are going to exceed that modest increase.
    Below is a chart depicting food inflation in Puerto Rico between 
December 2007 and May 2008 which includes some basic food elements that 
are critical to the school nutrition program in Puerto Rico. You can 
see the dramatic uptick in food inflation.


----------------------------------------------------------------------------------------------------------------
                                                             CPI                   Cumulative
           Categories of Articles            ----------------------------------    Percentage    Average Monthly
                                               December 2007       May 2008          Change       Percent Change
----------------------------------------------------------------------------------------------------------------
Rice........................................         108.139          133.602            23.55             4.71
Sandwich Bread, except whole wheat..........         108.942          126.452            16.07             3.21
Chicken Thighs (fresh and frozen)...........         118.089          129.233             9.44             1.89
Oats........................................         108.890          119.746             9.97             1.99
Fresh Whole Milk............................         115.505          124.507             7.79             1.56
Canned pigeon peas, chick peas and other             101.858          114.123            12.04             2.41
 grains.....................................
----------------------------------------------------------------------------------------------------------------
Source: Bureau of Labor Statistics, Department of Labor and Human Resources, Commonwealth of Puerto Rico Base
  period: December 2006.

    Each of these food stuffs: rice, bread, chicken, oats, fresh whole 
milk and canned peas and grains, is a fundamental element of diets in 
Puerto Rico and elements of our school nutrition program. As you see, 
the worldwide shortages of rice are having an impact in Puerto Rico. 
The increase in costs for the listed items from December 2007 to May 
2008 ranging from 7.8 percent for fresh milk to 23.4 percent for rice 
are going to create challenges for our schools, particularly since rice 
is on the school menu an average of 18 days a month.
    It is clear that if food inflation continues unabated the 
Commonwealth is going to confront serious challenges in regard to 
school nutrition. The Governor is certainly interested and supportive 
of Committee initiatives which will strengthen our program and give our 
children adequate nutritious school breakfasts and lunches particularly 
during these challenging economic times
    Again, Mr. Chairman, I would like to extend my appreciation for 
your leadership on issues critical to the Commonwealth and your 
longstanding interest in Puerto Rico.
            Sincerely,
                       Flavio Cumpiano, Executive Director,
       Federal Affairs Administration, Commonwealth of Puerto Rico.
                                 ______
                                 

 Prepared Statement of Paule T. Pachter, A.C.S.W., L.M.S.W., Executive 
     Director, Long Island Cares, Inc., the Harry Chapin Food Bank

    Thank you for the opportunity to provide this written statement to 
the members of the House Education and Labor Committee as you gather in 
Washington, D.C. on Wednesday, July 9, 2008 to hear statements as part 
of your hearing on: ``The Rising Cost of Food and Its Impact on Federal 
Child Nutrition Programs.'' I am extremely pleased to know that my 
colleague from Long Island, James Harnett, President and CEO of Family 
and Children's Association has been selected to serve on this Committee 
to gather testimony during this hearing.
    As the Executive Director of Long Island's only food bank and a 
lead organization in addressing the issue of hunger on Long Island, I'm 
am keenly aware of the needs of children, who are in jeopardy of 
becoming undernourished and those that are among the more than 260,000 
Long Islanders that are hungry and rely upon the services of our 
network of more than 560 community based organizations including food 
pantries, soup kitchens, day care centers, pre-school programs and 
other charitable organizations for food. Long Island Cares is a 
participating organization and receives support from The Emergency Food 
Assistance Program, as well as the Department of homeland Security 
Emergency Food and Shelter Program which in turn is delivered to 
community based programs serving more than 93,000 children.
    The poor national economy, which according to most experts is 
clearly in a recession, has been impacting the quality of life for many 
families and children on Long Island. While our network of community 
based agencies have historically provided support to individuals and 
families living at or below the national poverty level, there are a 
growing number of families whose incomes exceed the poverty level by 
20-50 thousand dollars who are turning to pantries and soup kitchens on 
Long Island for assistance in obtaining nutritious foods including 
meats, poultry and such staples as milk and eggs. Many Long Islanders 
are struggling as a result of the continued increase in the cost of 
fuel to heat their homes, gas to power their cars, the failures within 
the mortgage lending industry, which has resulted in more than 40,000 
homes on Long Island being in foreclosure, and as result of the rising 
cost of food, which has increased by more than 17 percent nationwide.
    Long Islanders are making difficult choices in reaction to the poor 
economy, and many of these families who may earn between $45 and 
$70,000 annually are turning to our network of food pantries, and other 
charitable organizations for assistance. Some can't afford meat or 
poultry, others can't afford fruits and vegetables, and we all can't 
afford to move forward without greater collaboration and support 
between food banks, anti-hunger organizations and our congressional 
leaders. Feeding hungry children on Long Island takes creativity, 
determination, resources and the type of passion and commitment that 
was displayed 27 years ago by singer, songwriter and activist, Harry 
Chapin, when he founded the organization that now bears his name.
    Long Island Cares and our network of food banks across New York 
State are committed to working together and to reaching out to create 
greater alliances with local food manufacturers, farmers, and food 
distributors to ensure that the needs of the more than 260,000 hungry 
children and families on Long Island are met with nutritional meals, 
access to entitlement programs, and passion. But we cannot accomplish 
this task alone, especially when it is estimated that 15% of the 
nation's population is relying on the services of hunger relief 
organizations such as Long Island Cares.
    More nutritional food is greatly needed to address the needs of 
children on Long Island. Such critical food items as cereals, shelf-
stabilized milk, fruits and vegetables are in short supply as donations 
from the public decline in response to our poor national economy. Long 
Island Cares hears from our network of community agencies each day that 
the numbers of individuals turning to food pantries and soup kitchens 
is increasing between 25-30% as a result of the poor economy. Our 
organization looks toward Congress to assist us as we move forward in 
meeting the nutritional needs of children whose families are relying on 
food pantries, day care centers and other important programs for food 
especially during those times that school is not in session and 
children are in need of our support and services even more.
                                 ______
                                 
    [The statement of Mr. Altmire follows:]

Prepared Statement of Hon. Jason Altmire, a Representative in Congress 
                     From the State of Pennsylvania

    Thank you, Chairman Miller, for holding this important hearing on 
the rising cost of food and its impact on federal nutrition programs.
    As the Chairman explained in his opening remarks, rising food costs 
have made it increasingly difficult for schools, child care programs, 
and summer food service programs to continue to provide nutritional 
meals for our nation's children. The federal reimbursement rate for 
child nutrition programs has not kept up with inflation, and is well 
below the amount necessary to supplement the increase in the price of 
staples such as bread, milk, and cheese.
    As I expect we will hear in the testimony of the witnesses today, 
schools have had to make difficult decisions to cope with these rising 
costs. Under the current system, federal nutrition programs in some 
cases cannot afford fresh fruits and vegetables. Likewise, some schools 
have been forced to increase the use of vending machines and a la carte 
sales in order to recoup costs even though food sold in vending 
machines had been shown to have less nutritional value than the school 
lunch itself. As a result, schools may feel pressure to provide less 
healthy options as well as resort to these easy sources of revenue at 
the cost of meeting the USDA's nutritional requirements.
    In addition, these less healthy offerings are significantly 
worrisome for a larger reason. Today's struggling economy forces 
families to make difficult decisions to budget their money. Some 
parents may not be able to provide their children with adequate 
nutrition at home because they are struggling with the increased cost 
of gas and groceries. For some kids, the school lunch is their most 
nutritious meal of the day, and, in some cases, it is their only meal 
of the day.
    I hope that the hearing today will not only raise our awareness and 
understanding of the pressing need to address the impact of rising food 
costs on federal nutrition programs, but uncover realistic and cost 
efficient solutions to keep these programs not only operational, but 
sufficient to meeting the nutritional needs of our nation's children.
    Thank you again, Mr. Chairman, for holding this hearing. I yield 
back the balance of my time.
                                 ______
                                 
    [Additional submission from Mrs. Biggert follows:]

    Prepared Statement of Beth Hillson, the American Celiac Disease 
                            Alliance (ACDA)

    Thank you Chairman Miller for calling this hearing on the impact of 
rising food prices on child and adult care food programs. The American 
Celiac Disease Alliance (ACDA), which represents patients, physicians, 
medical research centers, food manufacturers and others, commends you 
for highlighting this issue as schools and parents begin to prepare for 
the 2008-2009 school year.
    Under the National School Lunch Program students with special 
dietary needs are accommodated when that need is medically documented. 
Depending on the medical condition, special foods are substituted as 
per the medical prescription. A student with phenylketonuria or PKU 
will require low-protein items a child with celiac disease will need 
the substitutions to be gluten-free. For students with a medically 
prescribed diet, these accommodations are not a fad, or because they 
don't like the choices, it is because their lives depend on it.
    The inherited autoimmune disorder celiac disease affects an 
estimated 1 in 133 Americans, and is now recognized as the world's most 
common genetic disorder. Individuals with the condition are unable to 
eat foods containing gluten, a protein found in wheat, rye, and barley. 
For them, gluten sets off a reaction which causes damage to the small 
intestine. It impedes the body's ability to absorb vital nutrients and 
will trigger symptoms which can severely affect a child's classroom 
performance. The only course of treatment is strict adherence to the 
gluten-free diet.
    Even before food costs began to rise, schools balked at providing 
foods to meet the medically required diet of students with celiac 
disease. Why? The cost of a loaf of gluten-free bread is about $6.00; a 
box of 24 crackers $3.99; and a package of 12 chicken nuggets $5.50. As 
food costs have gone up, families are facing an even greater challenge 
to ensure their celiac children have access to a lunch at school, like 
every other child.
    In addition, a growing number of low-income families now have one 
or more celiac children. At Connecticut Children's Medical Center, for 
example, at least a dozen families fall into this category. The Center 
has established a celiac scholarship program to assist with the food 
purchases. These families once relied on school lunches as a major 
source of the daily food intake for their children. Now they face the 
added dilemma of making that food safe for a special diet.
    The ACDA just completed a survey of parents with celiac students to 
learn whether they were able to obtain gluten-free meals at school. Of 
the 2200 responses, over 92% wanted the school to provide the medically 
required gluten-free meals for their child. Hundreds of families have 
requested their child's diet be accommodated and were turned down. Over 
30% stated their child was unable to receive a balanced meal by simply 
selecting items known to be gluten-free such as fruits and vegetables, 
or yogurt when going through the lunch line.
    Some schools are trying very hard to accommodate medically 
prescribed diets and to find ways to offset the cost. Gilbert Unified 
School District in Arizona is one of the few districts in the country 
which regularly provides gluten-free options for celiac students. 
Earlier this year, the District Food Manager contacted the ACDA 
inquiring whether our organization had any grants to assist the school 
in purchasing gluten-free food products. It was very difficult to 
advise her that we do not.
    It is clear that food costs are forcing schools to reevaluate how 
to meet the requirements set out in federal nutrition programs. As the 
Committee examines ways to address this issue, the ACDA urges you to 
ensure that needs of students with medically prescribed diets are not 
overlooked.
    Thank you for the opportunity to present this testimony.
                                 ______
                                 
    [The statement of Mr. Hare follows:]

Prepared Statement of Hon. Phil Hare, a Representative in Congress From 
                         the State of Illinois

    Mr. Chairman, for the record, I would like to respond to assertions 
expressed in today's hearing that domestic ethanol production has 
played a significant role in the rising cost of food.
    Several factors have contributed to the recent rise in global food 
prices, primarily high fuel costs, weather, and increased demand from 
China and India.
    There is a tendency to blame ethanol production for the current 
high food prices. Yet, I would like to point out to the Committee that 
according to the Council of Economic Advisors, corn ethanol only 
accounts for 2-3 percent of the food cost increase.
    Many experts agree that the underlying force driving commodity 
prices is higher energy costs. Higher oil prices have increased the 
cost of production, transportation, wages and packaging, which all 
contribute to the main cost of retail food.
    Contrary to testimony given by Mr. Faber, corn ethanol has resulted 
in significant savings at the pump and has driven down the price of 
foreign oil.
    If we are to end our costly dependence on imported oil and improve 
our nation's energy security, ethanol must be a part of the solution.
    Mr. Chairman, thank you for giving me the opportunity to speak on 
this issue.
                                 ______
                                 
    [The statement of Mr. Kucinich follows:]

  Prepared Statement of Hon. Dennis J. Kucinich, a Representative in 
                    Congress From the State of Ohio

    I wish to thank Chairman Miller for calling this important hearing 
and our witnesses for joining us here today.
    Rising food costs are negatively impacting our school lunch 
programs. A dollar can only be stretched so far. Our states are 
struggling to serve the freshest and healthiest foods to our nation's 
children. Their struggle to stretch these precious food dollars farther 
as prices continue to escalate is now jeopardizing their ability to 
maintain nutritional priorities.
    High quality and fresh food too often comes with a larger price 
tag. Whole grains are more expensive than products made with white 
flour. Fresh fruits and vegetables cost more than canned or frozen 
products. Current reimbursement rates per meal fall short of the cost 
of producing the meal. As such, our school nutrition programs are in a 
precarious situation. Unfortunately food dollars can be stretched 
farther if the freshest and healthiest foods are sacrificed for cheaper 
options. When this happens the real sacrifice is the health of our 
children.
    Approximately one-third or 25 million children in the U.S. are 
overweight or on the brink of becoming overweight. Obesity in children 
is known to create a host of heath problems including an increased risk 
of type two diabetes and a shorter lifespan caused by heart disease and 
stroke. The obesity and diabetes epidemics affect low income Americans 
more often and with more severity. If we are serious about combating 
this trend we must ensure that healthy food is served in schools, our 
children are informed about how to make healthy dietary choices, and 
junk food and junk food advertising is removed from schools.
    Our school nutrition programs provide an invaluable service to our 
communities by playing a vital role in keeping children healthy and 
helping them learn. In some instances, if it were not for school 
breakfast and lunch programs children would go hungry. During the 2006-
2007 school year in Ohio the average daily participation in the school 
breakfast program was over 290,000 students. Over 200,000 of these 
breakfasts were provided to children free of charge. Over 420,000 
children received free lunches through the National School Lunch 
Program. Hungry children have a more difficult time learning in school 
and can suffer from behavior problems. Furthermore, schools present 
knowledge to our children that help them to make healthy nutritional 
choices and establish healthy lifestyles for the future.
    Again, I thank the Chairman for calling this important hearing and 
appreciate the valuable insight our witnesses are here to provide.
                                 ______
                                 
    [The statement of Mrs. McCarthy follows:]

   Prepared Statement of Hon. Carolyn McCarthy, a Representative in 
                  Congress From the State of New York

    I want to thank Chairman Miller for holding this hearing today and 
I would like to welcome Mr. James Harnett from the Family and 
Children's Association on Long Island. I am very happy to have him here 
and I look forward to his testimony.
    The rising cost of food is one facet in a complex problem facing 
our country today. The Healthy Families and Communities Subcommittee, 
which I chair, touched on the rising cost of food as we looked at the 
rising cost of energy for Americans, including home heating fuel and 
transportation costs. On Long Island, the heat or eat debate has 
already happened. LIHEAP monies are almost, if not already, gone, and 
we are not even a month into summer yet. How will families afford to 
stay cool AND afford healthy food or just food in general?
    The Federal child nutrition programs are also affected by the 
rising cost of food and the fuel that it takes to bring the food to the 
programs for our nation's vulnerable young people. The National School 
Lunch Program provides nutritional, low-cost or free lunches to 
children each day--in 2006 the program served more than 30 million 
children! A similar program exists for breakfast as well. These are 
year round programs, feeding kids both during the school year and the 
summer months. Schools and programs receive commodities and financial 
reimbursements for each meal served.
    Yet, as food costs rise, school food authorities are seeing the 
cost of breakfast and lunch rise faster than the standard increase in 
inflation -of the reimbursement rates. Meal services must operate as 
non-profit programs and with costs rising without reimbursement rising 
similarly, therefore we are seeing tough choices being made:
    Schools are raising the cost of lunches for those who can afford 
it.
    Schools are scrutinizing every aspect of their meal programs to cut 
costs.
    Schools could turn to selling less healthy competitive foods to 
increase revenue. We all know that junk food sells.
    Schools will seek to purchase foods lower in price, which could 
mean a reduction in the amount of fresh fruits and vegetables. (In 
fact, the USDA recommends using canned or frozen vegetables more often 
to help maintain healthier meals at a lower cost).
    I know that there are many other options that I have not listed, 
and creative, innovative actions being taken to ensure that our 
nation's vulnerable youth are being fed.
    Communities are struggling with this issue: low-income families and 
even some middle-income families are feeling the pinch of tight 
economic times and the impact on what they feed their children. 
Families are moving to cheaper staples, like peanut butter sandwiches 
and pasta--but we know that to be healthy we need fruits and 
vegetables, too, and more of them both in a day than carbohydrates and 
fats. Nutritional standards will alter as families seek to have full 
stomachs and stretch their dollars farther.
    Schools in communities are struggling as well, as we will hear 
today. I am looking forward to learning more of what the impact of 
higher food prices is having on our child nutrition programs and then 
moving on to see what role we can take in addressing this issue.
                                 ______
                                 
    [The statement of Ms. Woolsey follows:]

    Prepared Statement of Hon. Lynn C. Woolsey, a Representative in 
                 Congress From the State of California

    American families across the country are struggling. Food and 
energy costs are rising and families are forced to make tough decisions 
between feeding their families, heating their homes, and paying their 
bills. These choices are no less severe for schools across the country. 
Unfortunately, students have become increasingly dependent on schools 
for the only nutritious meal they can get during their day. That's why 
it's so important that our nation's schools and child support agencies 
continue to have the resources they need to provide our children with 
healthy, nutritious meals.
    Central to this effort is ensuring that every child is given access 
to foods that meet sound nutritional standards based upon the most 
current research into child nutrition. Senator Tom Harkin (D-IA) and I 
have introduced S. 771 and H.R. 1363, the Child Nutrition Promotion and 
School Lunch Protection Act, which would make certain that all foods 
sold in schools are based on the most current nutrition science. 
Current U.S. Department of Agriculture regulations that limit the sale 
of junk food in schools have not been updated in almost 30 years, 
despite major changes in nutritional science as well as changes in food 
consumption patterns and growth in childhood obesity. Steps to protect 
the health of our children must keep pace with current nutrition 
science.
    Unfortunately, rising food costs may not only cause schools and 
agencies to turn to cheaper, less nutritious options, but the increased 
costs may affect their ability to provide food to every eligible child. 
Because of rising food costs, it's becoming difficult for both free 
meal programs and parents to provide nutritious meals to children.
    This summer, more families have needed to turn to free lunch 
programs to feed their children. Community Action Partnership of Sonoma 
County, which is located in Santa Rosa, California, in my Congressional 
District, runs two summer programs for children. One program combines 
activities with a free lunch and the other program solely provides a 
meal. On the first day, 90 children arrived for a meal, more than the 
program had had show up before. There wasn't enough food for every 
child and 40 children were unable to get meals that day. Unfortunately, 
this trend continued through the rest of the summer. We have a 
responsibility to our children to make sure they do not go hungry. 
Whether it's increasing the reimbursement rate for meals or providing 
more flexibility so that programs can respond to rising food costs and 
continue to provide nutritious meals, we must find a way to help these 
programs ensure that every child who needs a meal receives one.
    Additionally, it's clear that the challenges of providing 
nutritious meals to every child who needs one will continue to grow in 
the future. Over the past five years, corn producers have shifted from 
devoting only three percent of their crop to ethanol production to 
dedicating more than 20 percent. As a result, the price of corn has 
doubled, and the prices of foods dependent on corn have surged. As 
transportation costs increase, schools must increasing rely on organic 
and local producers to minimize their costs and support local 
agriculture. This will not only strengthen our agriculture economy, but 
will improve the ability of our schools to provide healthy, nutritious 
foods to students.
    Despite the increasing challenge to providing hungry children with 
nutritious meals, we must continue to expand access to free and reduced 
price meals. Our school lunch and breakfast programs provide meals for 
many children who would otherwise go without or go with very little. We 
need to make sure that every student, including high school students, 
are given the option for a school breakfast and lunch if their families 
cannot afford to feed them. In addition, we need to give schools and 
agencies the option to provide dinners if the children are going to be 
there through the dinner hour so that these children are guaranteed to 
have a nutritious meal even when parents are working late. These more 
long-term solutions will go a long way towards ensuring that no child 
goes hungry. I look forward to working with my colleagues to accomplish 
these goals.
                                 ______
                                 
    [Questions submitted to witnesses and their responses 
follow:]

                                             U.S. Congress,
                                     Washington, DC, July 16, 2008.
Scott Faber, Vice President for Federal Affairs,
Grocery Manufacturers Association, 1350 I St NW, Suite 300, Washington, 
        DC.
    Dear Mr. Faber: Thank you for testifying at the July 9, 2008 
hearing of the Committee on Education and Labor on ``The Rising Cost of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Please respond in writing to the following questions:
    1. Please elaborate on the relationship between the Grocery 
Manufacturers Association (GMA) and the study done by Bill Lapp that 
you reference in your testimony in regards to the 9% food inflation 
rate forecast. Did GMA provide any funding and/or other support for Mr. 
Lapp's study?
    2. Please provide a detailed, step-by-step explanation and 
justification of the methodology used by Mr. Lapp to derive the 9% 
inflation rate number. Please clarify exactly what this 9% rate 
represents.
    3. Please list all of the economic studies for which GMA or its 
members have provided funding in the past 5 years.
    4. Please list any economists or analysts who have received funding 
from GMA or its members in the past 3 years.
    5. In your testimony, you indicated that you believe that the 54 
cent tariff is preventing 15 billion gallons of ethanol from being 
imported. Could you please provide any supporting evidence and analysis 
for this assertion?
    6. In your testimony, you advocate for a chance in biofuel policy. 
If the 2008 RFS were lowered by 50% to 4.5 billion gallons, how much 
ethanol reduction would you anticipate in 2008 and 2009? Please provide 
any supporting evidence and analysis for your position.
    Please send an electronic version of your written response to the 
questions to the Committee staff by close of business on Monday, July 
21, 2008--the date on which the hearing record will close. If you have 
any questions, please do not hesitate to contact the Committee.
            Sincerely,
                                             George Miller,
                                                          Chairman.
                                 ______
                                 
                                                     July 21, 2008.
Hon. George Miller, Chairman,
House Committee on Education and Labor, Rayburn House Office Building, 
        Washington, DC.
    Dear Chairman Miller: Pursuant to your letter of July 16, please 
accept the following responses to the questions posed by Committee 
members following the July 9th Education and Labor Committee hearing on 
``The Rising Cost of Food and Its Impact on Federal Child Nutrition 
Programs.''
    1. Mr. Lapp's June 2008 study, ``Rising Commodity Prices and their 
Impact upon US Food Inflation,'' is an updated version of a December 
2007 study he authored. The December study was produced without any 
outside financial support. GMA subsequently retained Mr. Lapp to update 
his study to reflect increases in commodity prices that have occurred 
in the time since the Energy Independence and Security Act of 2007 was 
enacted.
    2. Mr. Lapp estimates that U.S. consumers face an average annual 
food inflation rate of 9 percent between 2008-2012.
    Mr. Lapp's methodology involved examining historic precedent for 
sharp rises in commodity prices, specifically during the 1970's. Based 
on $5.25/bu corn (a low estimate), Lapp derived price forecasts for a 
variety of products (livestock/dairy/eggs) and for other food input 
prices (other grains/oilseeds). He estimated the share of major food 
products represented by farm values, leaning on USDA estimates. Lapp 
increased the farm value for most products 4 percent- as occurred 
during the 1970's surge in prices- and used a higher percentage for 
bakery and cereal items based on an unpublished survey of bread/bakery 
producers. He then factored in other input costs (labor, 
transportation, manufacturing)- which he projects will add 3.6 percent 
to food costs per year from 2008-2012. Based on all input costs, he 
projects a 9 percent annual increase in retail food prices.
    3. GMA has funded three studies in the past year to ascertain the 
impact of bio-fuels on commodity prices, consumer food prices, and 
energy prices. The Advanced Economic Solutions study was released in 
June, as indicated. GMA was also one of several organizations that 
financed a study by Iowa State University's Center for Agricultural and 
Rural Development in July 2007 entitled ``Emerging Biofuels: Outlook of 
Effects on U.S. Grain, Oilseed, and Livestock Markets.'' GMA recently 
hired Hart Energy Consulting for an analysis of the impact various 
policy change scenarios will have on energy prices. GMA is aware of 
only one member-funded study, written by former USDA Chief Economist 
Keith Collins and financed by Kraft Foods. This study was released in 
June 2008 and was entitled ``The Role of Biofuels and other Factors in 
Increasing Farm and Food Prices.''
    4. GMA retained Bill Lapp of Advanced Economic Solutions for 
economic analysis related to food price inflation and has not retained 
or contributed to any other economists during the past three years.
    5. GMA has consulted with leading experts and estimates that Brazil 
could increase the production of ethanol from sugar for the US market 
to 2 billion gallons by 2009, 3 billion gallons by 2010, and by more 
than 15 billion gallons by 2018. Ethanol refining capacity would also 
be developed in other Latin America nations, including Mexico. However, 
these new investments are largely dependent upon market signals for US 
policymakers, including the elimination of the tariff of imported 
ethanol. Eliminating the tariff, according to experts, would lower both 
food and gasoline prices.
    6. GMA has urged the Administration to reduce the RFS mandate for 
2008 and 2009 to production levels for 2007. I have attached our 
comments to EPA.
    Thank you again for providing me the opportunity to share the 
Grocery Manufacturers Association's views on this important issue.
            Sincerely,
                                               Scott Faber,
                                   Vice President, Federal Affairs.
                                 ______
                                 
                                             U.S. Congress,
                                     Washington, DC, July 10, 2008.
James J. Harnett, President & CEO,
Family and Children's Association, 100 East Old Country Road, Mineola, 
        NY.
    Dear Mr. Harnett: Thank you for testifying at the July 9, 2008 
hearing of the Committee on Education and Labor on ``The Rising Cost of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Representative Lynn Woolsey (D-CA), a member of the Early 
Childhood, Elementary and Secondary Education Subcommittee, has asked 
that you respond in writing to the following questions:
    1. What are the benefits to allowing schools and agencies to serve 
a third meal, such as dinner?
    2. What are the benefits to expanding the Afterschool Supper 
Program to children over the age of 13? What additional resources are 
needed to accomplish this?
    Please send an electronic version of your written response to the 
questions to the Committee staff by close of business on Monday, July 
21, 2008--the date on which the hearing record will close. If you have 
any questions, please do not hesitate to contact the Committee.
            Sincerely,
                                             George Miller,
                                                          Chairman.
                                 ______
                                 
                                        Mineola, NY, July 22, 2008.
Hon. George Miller, Chairman,
Committee on Education and Labor, U.S. House of Representatives, 
        Washington, DC.
    Dear Congressman Miller: Thank you so much for your letter 
regarding my testimony on July 9, 2008 at the Education and Labor 
Committee's hearing on ``The Rising Cost of Food and Its Impact on 
Federal Child Nutrition Programs'' and for the follow-up questions from 
Representative Lynn Woolsey (D-CA).
    With regard to Representative Woolsey's first question, I believe 
the benefits of allowing schools and agencies to serve a third meal 
include:
    1. Providing a third meal gives children and teens full access to 
the nutritious meals that their bodies need. It eases the burden on 
low-income families that are struggling to make ends meet. It decreases 
the likelihood that families will run out of money for food at the end 
of the month; that children will go without the nutrition their bodies 
need; and that parents will give up the food they need so their 
children do not have to go without.
    It also is likely that providing a third meal will help counter the 
current childhood obesity epidemic. Studies show that children who 
participate in the school breakfast and lunch programs drink more milk, 
eat more fruits and vegetables, and consume less fat. A recent study 
found that girls who participate in school breakfast, school lunch or 
food stamps programs were less likely to be overweight. Like the school 
meals programs, the afterschool and summer nutrition programs have 
nutrition requirements that ensure the nutritional value of the meals.
    As I testified it is important to allow schools and organizations 
to provide a third meal after school and during the summer. Currently, 
the Summer Food Program provides only sufficient funding at most sites 
(except migrant sites and camps) for a maximum of two meals.
    2. The Afterschool Supper Program allows school-age children and 
teens to receive a supper at afterschool or youth development programs. 
A meal can also be provided at programs operating on the weekend or 
during school holidays. As you know, the program is only available in 
eight states: my state, New York, Delaware, Illinois, Michigan, 
Missouri, Oregon, Pennsylvania and West Virginia. More states should be 
included in this important nutrition program, so that afterschool 
programs can better meet the needs of the families they serve.
    The Afterschool Supper Program is easier to administer than the 
Child and Adult Care Food Program (CACFP) option, which allows children 
younger than 13 to receive suppers. Afterschool programs that are 
located in a low-income area are eligible to participate in the 
Afterschool Supper Program. To provide suppers under the CACFP option 
for children younger than 13, afterschool programs have to individually 
qualify each child for the program. This creates a tremendous amount of 
administrative work.
    This program is especially important for children whose parents 
work non-traditional hours, which is common for many low-income 
parents. Many afterschool programs operate long hours to provide 
quality programming and child care to meet the needs of the families 
they serve.
    In addition to supporting low-income families, the Afterschool 
Supper Program makes it more cost effective to feed children after 
school even when the cost of food is skyrocketing. First, all of the 
suppers are reimbursed at the highest rate of reimbursement (the free 
rate). The program, allowing children younger than 13 to receive 
supper, bases the reimbursement rate on the household income of each 
child who attends the afterschool program.
    Second, it is difficult to provide a healthy snack with the $0.71 
allotted for snack reimbursement. In order for an afterschool program 
to be reimbursed for a snack, it must serve two of the four components 
(milk, a serving of fruits or vegetables, a serving of protein, and a 
grain). The supper must include five components (milk, two servings of 
fruits or vegetables, a protein, and a grain). The supper reimbursement 
is $2.57 plus an additional $0.2075 in commodities or cash in lieu of 
commodities, a total of $2.7775 per meal.
    Afterschool programs need to serve three components in addition to 
the two required for snacks. This additional funding allows afterschool 
programs to provide healthier food, to serve enough food to keep 
children and teens learning and engaged throughout the afternoon, and 
to more fully cover administrative and transportation costs.
    In expanding the supper program to additional states, I think it is 
critical to further streamline the program. For example, it would be 
much easier for schools to participate if they could do so through the 
school nutrition programs instead of through the CACFP. Operating a 
second child nutrition program simply creates more administrative work 
for the school.
    With regard to Representative Woolsey's second question, the first 
part is easy: teenagers over 13 years old simply require more 
nutritious food to feed their growing bodies. I look back in some shock 
at how much food I could eat as a teenager without significant weight 
gain and how little food I require now to produce weight increase.
    The second part of the question is much more complicated and beyond 
my current information. I was able to review some data for 7 of the 8 
states in the After School Supper program, but for only one month 
(October 2007) and the data was not broken down by age.
    Since the Afterschool Supper Program is an entitlement program, the 
additional resources required to expand the supper program, if my 
understanding is correct, would be determined by the Congressional 
Budget Office. I assume that the U.S. Department of Agriculture may 
also have the data to answer Representative Woolsey's question.
    I am confident that a simple calculation would show that the costs 
of expanding the program would be reasonable compared to the positive 
impact it will have on low-income children and their families.
    Thank you again for the opportunity to testify. I am grateful for 
the Committee's leadership in recommending the reauthorization and 
improvement to these critically important nutrition programs for our 
Country's economically disadvantaged children to the full House of 
Representatives for its consideration.
            Sincerely,
                                          James J. Harnett,
                                                   President & CEO.
                                 ______
                                 
                                             U.S. Congress,
                                     Washington, DC, July 16, 2008.
Kate Houston, Deputy Under Secretary for Food, Nutrition and Consumer 
    Services,
U.S. Department of Agriculture, 400 Independence Ave., S.W., 
        Washington, DC.
    Dear Ms. Houston: Thank you for testifying at the July 9, 2008 
hearing of the Committee on Education and Labor on ``The Rising Cost of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Representative Danny K. Davis (D-IL), a member of the Early 
Childhood, Elementary and Secondary Education Subcommittee and the 
Higher Education, Lifelong Learning and Competitiveness Subcommittee, 
has asked that you respond in writing to the following question:
    1. Since it's important that we continue to offer our kids milk 
with each school meal and since milk prices--like all food prices--have 
been rising, doesn't that make it all the more important that Congress 
look at additional resources to make reimbursement rates more 
realistic?
    Representative Lynn Woolsey (D-CA), a member of the Early 
Childhood, Elementary and Secondary Education Subcommittee, has asked 
that you respond in writing to the following questions:
    1. As a Member of the Energy and Environment Subcommittee of the 
Science Committee, I am interested to hear your views on how increased 
production of corn ethanol has affected our ability to provide sound 
nutritious meals to our children?
    2. In your recommendations for how schools could increase revenue 
you suggest that schools consider increasing prices for ala carte 
items. It is our understanding that there are no nutrition standards 
for ala carte items unlike the reimbursable meal. How does the 
Department reconcile this policy with its effort to increase nutritious 
foods in the program and efforts to reduce childhood obesity?
    Please send an electronic version of your written response to the 
questions to the Committee staff by close of business on Monday, July 
21, 2008--the date on which the hearing record will close. If you have 
any questions, please do not hesitate to contact the Committee.
            Sincerely,
                                             George Miller,
                                                          Chairman.
                                 ______
                                 
                                             U.S. Congress,
                                     Washington, DC, July 10, 2008.
Paula James, Director,
Child Health and Nutrition Program, Contra Costa Child Care Council, 
        1035 Detroit Ave., Concord, CA.
    Dear Ms. James: Thank you for testifying at the July 9, 2008 
hearing of the Committee on Education and Labor on ``The Rising Cost of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Representative Lynn Woolsey (D-CA), a member of the Early 
Childhood, Elementary and Secondary Education Subcommittee, has asked 
that you respond in writing to the following question:
    1. What are the benefits to allowing schools and agencies to serve 
a third meal, such as dinner?
    Please send an electronic version of your written response to the 
questions to the Committee staff by close of business on Monday, July 
21, 2008--the date on which the hearing record will close. If you have 
any questions, please do not hesitate to contact the Committee.
            Sincerely,
                                             George Miller,
                                                          Chairman.
                                 ______
                                 

          Responses to Questions for the Record From Ms. James

    What are the benefits of allowing schools and agencies to serve a 
third meal, such as dinner?
    As I stated in my testimony, more and more children are coming to 
child care hungry. As families struggle to keep food on the table, the 
meals provided by the Child and Adult Care Food Program, as well as 
those provided by the other federal nutrition programs in schools and 
afterschool programs, provide a significant safety net. Young children 
are often in child care settings for long hours--sometimes from 6 AM to 
6 PM or even later if their parent(s) work non-traditional hours. As a 
result, many of them have at best a compromised dinner. In Contra Costa 
County, as in many other areas of the country, working parents have 
long commutes; time constraints and a lack of money make fast food 
dinners a growing reality. Child care providers tell us that often the 
foods the children get in child care are the only food they get all 
day. These stories are repeated in school based nutrition programs as 
well.
    Reimbursing for a third meal, dinner, would provide a significant 
nutrient contribution to children in child care and after school 
programs. There is no question that if a growing young child had access 
to a nutritious federally reimbursed dinner while they are in care, 
that they would consume more fruits, vegetables, and milk and fewer 
foods like chips, fries and sodas. This latter group of unhealthy foods 
are a reality for many families who struggle with little time and money 
to put healthy, nutritious foods on the table that will benefit a 
growing child. Thus, reimbursement for a third meal would also likely 
contribute to the prevention of childhood obesity.
    The Child and Adult Care Food Program currently provides 
reimbursement for dinners in afterschool programs in seven states 
(Delaware, Illinois, Michigan, Missouri, New York, Oregon, Pennsylvania 
and West Virginia), for children in low-income neighborhoods 
participating in educational and enrichment programs. CA has invested 
$550 million dollars in quality afterschool programs for low-income 
children. If children in these programs had access to a nutritious 
dinner, this investment would be increased significantly and the 
benefit to the kids could not be overstated.
    However, before taking steps to expand child nutrition programs to 
include a third meal, steps must be taken to improve access and 
participation by simplifying the paperwork and administrative burdens 
associated with operation of these programs. In CA and nationally, the 
administrative cost and paperwork burdens have outstripped the ability 
of these organizations to stay financially viable. The cost of 
administering the programs far outweighs the administrative 
reimbursement.
    Reimbursement for a third meal such as dinner would be invaluable 
to many young children, providing food security where there may be 
none, alleviating hunger, helping in the prevention of childhood 
obesity and supporting struggling families with the knowledge that 
their children have access to a healthy dinner. In consideration of 
this recommendation, Congress must ensure that the organizations needed 
to administer the program have the administrative resources and program 
simplification to do the job.
                                 ______
                                 
                                             U.S. Congress,
                                     Washington, DC, July 10, 2008.
Ephraim Leibtag, Ph.D., Economist,
U.S. Department of Agriculture, Room N2124, 1800 M Street, NW, 
        Washington, DC.
    Dear Dr. Leibtag: Thank you for testifying at the July 9, 2008 
hearing of the Committee on Education and Labor on ``The Rising Cost of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Representative Lynn Woolsey (D-CA), a member of the Early 
Childhood, Elementary and Secondary Education Subcommittee, has asked 
that you respond in writing to the following question:
    1. Several witnesses suggested that the Consumer Price Index should 
be updated more than once a year to better reflect the changing costs 
for providing meals to our children. Would this better help struggling 
communities in times of rising food costs?
    Please send an electronic version of your written response to the 
questions to the Committee staff by close of business on Monday, July 
21, 2008--the date on which the hearing record will close. If you have 
any questions, please do not hesitate to contact the Committee.
            Sincerely,
                                             George Miller,
                                                          Chairman.
                                 ______
                                 
                                             U.S. Congress,
                                     Washington, DC, July 10, 2008.
Katie Wilson, Food Service Director,
Onalaska Schools, 705 8th Ave N, Onalaska, WI.
    Dear Dr. Wilson: Thank you for testifying at the July 9, 2008 
hearing of the Committee on Education and Labor on ``The Rising Cost of 
Food and Its Impact on Federal Child Nutrition Programs.''
    Representative Lynn Woolsey (D-CA), a member of the Early 
Childhood, Elementary and Secondary Education Subcommittee, has asked 
that you respond in writing to the following question:
    1. How have increased food prices impacted the ability of schools 
to offer universal school breakfast?
    Please send an electronic version of your written response to the 
questions to the Committee staff by close of business on Monday, July 
21, 2008--the date on which the hearing record will close. If you have 
any questions, please do not hesitate to contact the Committee.
            Sincerely,
                                             George Miller,
                                                          Chairman.
                                 ______
                                 

         Responses to Questions for the Record From Dr. Wilson

    How have increased food prices impacted the ability of schools to 
offer universal school breakfast?
    Universal breakfast programs are known to be powerful tools in 
promoting healthy childhood weight, increasing academic success and 
combating hunger. We also know that universal breakfast programs reduce 
the stigma associated with free school breakfast and greatly increase 
overall participation in school breakfast. Universal breakfast programs 
function best when schools serve a high percentage of students who are 
eligible for free and reduced meals. School districts are able to 
offset the cost of providing free breakfasts to all children due to the 
increase in participation in the breakfast program. The increase in 
reimbursements from free and reduced meals offsets the revenue that 
would have been generated from paid students who participate. Rising 
food costs increase the break even point--the point at which meal 
production costs equal reimbursement revenue. If a school is unable to 
reimburse for enough meals to cover their costs, they will suffer a 
loss and that money will need to be directed from somewhere else in the 
school nutrition program.
    In the past, school districts were willing to maintain a negative 
revenue balance on their universal breakfast program in order to 
provide students with such a valuable service. Unfortunately, rising 
costs of food, labor and indirect expenses are leaving school districts 
with no additional revenue to support the program. Although not yet 
widespread, SNA has observed programs who historically have offered 
universal breakfast discontinuing the program related to increased 
costs. Preliminary data from SNA's Meal Cost Survey shows that 27% of 
school districts are eliminating programs and services in order to 
reduce expenses. As prices continue to increase we expect more 
districts will need to discontinue important programs, such as this, to 
maintain financial integrity.
                                 ______
                                 
    [Whereupon, at 12:01 p.m., the committee was adjourned.]

                                 
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