[Federal Register Volume 79, Number 2 (Friday, January 3, 2014)]
[Rules and Regulations]
[Pages 325-340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31433]



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  Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Rules 
and Regulations  

[[Page 325]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 210

[FNS-2011-0025]
RIN 0584-AE15


Certification of Compliance With Meal Requirements for the 
National School Lunch Program Under the Healthy, Hunger-Free Kids Act 
of 2010

AGENCY: Food and Nutrition Service, USDA

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule adopts, with some revisions, changes to the 
National School Lunch Program (NSLP) regulations, as set forth in the 
interim final rule published in the Federal Register on April 27, 2012. 
The changes conform to requirements contained in the Healthy, Hunger-
Free Kids Act of 2010 regarding performance-based cash assistance for 
school food authorities (SFAs) certified compliant with meal pattern 
and nutrition standards. The changes finalized in this rule include 
requiring State agencies to certify participating SFAs that are in 
compliance with meal pattern and nutrition standard requirements as 
eligible to receive performance-based cash assistance for each 
reimbursable lunch. This rule also finalizes the requirement in the 
interim final rule that State agencies disburse performance-based cash 
assistance to certified SFAs, and withhold the performance-based cash 
assistance from SFAs determined to be out of compliance with meal 
pattern or nutrition standards during a subsequent administrative 
review. Additionally, this final rule is adopting minor changes based 
on comments on the interim final rule that will help to streamline the 
certification process. These changes include making permanent the 
flexibility that State agencies should consider any SFA compliant with 
the daily and weekly ranges for grain and meat/meat alternates if 
documentation is compliant with the daily and weekly minimums.

DATES: This final rule is effective March 4, 2014.

FOR FURTHER INFORMATION CONTACT: Julie Brewer, Chief, Policy and 
Program Development Branch, Child Nutrition Division, FNS, 3101 Park 
Center Drive, Alexandria, Virginia 22302, or by telephone at (703) 305-
2590.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Healthy, Hunger-Free Kids Act of 2010 (Pub. L. 111-296) (the 
HHFKA), enacted December 13, 2010, made significant changes to the meal 
pattern and reimbursement requirements for school breakfasts and 
lunches served in accordance with the Richard B. Russell National 
School Lunch Act (NSLA) (42 U.S.C. 1751 et seq.).
    Section 201 of the HHFKA amended section 4(b) of the NSLA, 42 
U.S.C. 1753(b), by requiring the Secretary to update the meal patterns 
and nutrition standards for the NSLP and School Breakfast Program (SBP) 
and to issue regulations requiring all SFAs to comply with the updated 
meal patterns and nutrition standards. On January 26, 2012, the 
Department issued a final rule, titled Nutrition Standards in the 
National School Lunch and School Breakfast Programs (77 FR 4088). With 
some exceptions, the implementation date of that final rule was July 1, 
2012.
    Section 201 of the HHFKA also amended the NSLA to provide for 
additional payments in the form of performance-based reimbursement of 6 
cents per lunch served beginning on October 1, 2012, in SFAs certified 
by the State agency to be in compliance with the updated meal patterns 
and nutrition standards.
    In response to statutorily imposed effective dates established by 
section 201 of the HHFKA, the Department published an interim final 
rule on April 27, 2012 (77 FR 25024), which amended 7 CFR part 210 to 
include criteria for the certification and validation processes and 
require State agencies to begin certifying SFAs beginning October 1, 
2012. The interim final rule invited public comment for a 90-day 
period, beginning April 27, 2012 and ending July 26, 2012. During the 
comment period, FNS received 173 comments on the interim final rule: 
117 comments from SFAs, 45 comments from advocacy organizations, 6 from 
individuals and 5 from State agencies.

II. Discussion of Public Comments and FNS Response

    Following an analysis of comments, this rule adopts, as final, the 
provisions of the interim final rule, with revisions as described 
below. The finalized provisions include the procedures for performance-
based certifications, required documentation and timeframes, validation 
reviews, compliance and administrative reviews, reporting and 
recordkeeping, and technical assistance.

Reporting and Recordkeeping

    The interim final rule established at 7 CFR 210.5, requirements for 
State agencies to submit a quarterly report, as specified by FNS, 
detailing the disbursement of performance-based reimbursements, 
including the total number of SFAs in the State, the names and 
locations of certified SFAs, and the total number of lunches earning 
the performance-based reimbursement for each month.
    FNS received feedback from State agencies that some of this 
information would be particularly difficult and/or burdensome to report 
by SFAs. In an effort to reduce burden, FNS notified State agencies on 
January 22, 2013 in memorandum SP 31-2012 (http://www.fns.usda.gov/cnd/governance/Policy-Memos/2012/SP31-2012osr3.pdf), and later revisions, 
that FNS would collect on a quarterly basis, the total number of SFAs 
in the State and the names of certified SFAs.
    Therefore, this rule finalizes this reporting change at 7 CFR 
210.5(d)(2)(ii) to require that State agencies only include in this 
quarterly report the total number of SFAs in the State and the names of 
certified SFAs.
    Additionally, FNS created the quarterly report as way to track the 
number of SFAs being certified throughout the country. FNS realizes 
that once all SFAs have been certified, the information reported on the 
quarterly report will become repetitive and will no longer be useful. 
Therefore, FNS will no longer require State agencies to submit the 
quarterly report

[[Page 326]]

once all SFAs in the State have been certified.

Certification Process

    The interim final rule established at 7 CFR 210.7, criteria for 
State agencies and SFAs to follow during the certification process. 
These criteria include requiring SFAs to submit to their State agency 
documentation demonstrating that they are in compliance with the new 
meal pattern and nutrition requirements. State agencies are then 
required to determine if SFAs are in compliance with meal pattern and 
nutrition standard requirements, and if so, certify the SFA as eligible 
to receive the 6 cents performance-based cash assistance for each 
reimbursable lunch served (an additional 6 cents per lunch became 
available beginning October 1, 2012 and is adjusted annually 
thereafter). The interim final rule also required that State agencies 
disburse performance-based cash assistance to certified SFAs, and 
withhold the performance-based cash assistance from SFAs determined to 
be out of compliance with meal pattern or nutrition standards during 
subsequent administrative reviews.
    Several commenters felt that the work required in the certification 
process was too burdensome for school food service directors. One 
common complaint was that SFAs that offer a wide variety of menu 
choices may be forced to limit their menus due to the difficulty with 
the certification process.
    The certification process established in the interim final rule was 
intended to both meet the intent of the provision (that SFAs 
demonstrate compliance with the new meal pattern requirements) and 
impose a reasonable administrative burden on SFAs. FNS provided several 
training opportunities across the Nation to ensure that our State 
agency partners were well equipped to train local operators on the new 
certification process. Representatives from every State agency 
participated in at least one of these in-person trainings. In addition 
to in-person trainings, FNS conducted several webinars for both State 
agencies and SFAs on the certification process and on how to complete 
certification materials. Finally, FNS issued memoranda including a 
series of questions and answers related to the 6 cents certification 
process. Most recently, FNS issued SP 31-2012 (3rd Revision) on January 
22, 2013, which included revised questions and answers on the 
certification process. The memorandum can be found at: http://www.fns.usda.gov/cnd/governance/Policy-Memos/2012/SP31-2012osr3.pdf. 
FNS plans to continue to update the memorandum as more questions from 
States and SFAs are received.
    Based on program data and other information from State agencies, 86 
percent of SFAs nationwide have submitted certification materials as of 
the end of October 2013. By the end of September 2013, 80 percent of 
SFAs had been certified.
    FNS is encouraged by these numbers and feels it demonstrates that a 
majority of SFAs have an understanding of the certification process. 
FNS continues to encourage State agencies to provide technical 
assistance and guidance to those SFAs not engaged in the certification 
process. Therefore, FNS will not be making changes to the requirements 
for the certification process in this final rule.

Maximums for Grains and Meats and Frozen Fruit With Added Sugar

    As stated above, FNS established procedures for the certification 
process at 7 CFR 210.7. As part of the certification determination 
process, State agencies must evaluate whether documentation provided by 
SFAs (including menus, a menu worksheet measuring components and a 
nutrient analysis or assessment) is compliant with the updated meal 
pattern and nutrition requirements. This evaluation includes 
determining whether the SFA's menu meets the daily and weekly 
requirements for grains and meat/meat alternates.
    Since implementation of the interim final rule, FNS has received 
feedback from both State agencies and SFAs about the certification 
process and the new meal pattern requirements in general. A frequent 
concern expressed by State and SFA partners was significant operational 
challenges in not exceeding the weekly maximum requirements for the 
grains and meats/meat alternate components, particularly for SFAs with 
schools with multiple menu offerings and multiple serving lines during 
meal service.
    SFAs reported that for both grains and meat/meat alternates, some 
popular products are not yet readily available from suppliers in the 
wide ranges of serving sizes needed to meet the grain and meat/meat 
alternate weekly maximum requirements. Additionally, SFAs have reported 
that they are experiencing challenges with student acceptability of new 
items and smaller servings of items on their menus.
    In response to concerns, FNS issued SP 11-2013 on December 20, 2012 
(http://www.fns.usda.gov/cnd/governance/Policy-Memos/2013/SP11-2013os.pdf), providing local operators with flexibility in meeting the 
weekly maximums for grains and meat/meat alternates for compliance 
purposes in School Year (SY) 2012-2013. The memorandum stated that 
State agencies should consider any SFA compliant with the weekly ranges 
for these two components if the FNS-developed or FNS-approved 
Certification Tool and required supporting documentation indicate the 
menu is compliant with the daily and weekly minimums. SFAs are still 
expected to fall within the weekly minimum and maximum ranges for 
calories. These flexibilities were extended to School Year 2013-14 in 
SP 26-2013, which was issued on February 25, 2013 (http://www.fns.usda.gov/cnd/governance/Policy-Memos/2013/SP11-2013os.pdf).
    Feedback on the memoranda concerning flexibility for weekly maximum 
grains and meat/meat alternates has been overwhelmingly positive, and 
there have been numerous requests to further extend this change. This 
new flexibility for measuring compliance has had a meaningful impact on 
the certification process by making it less complicated for SFAs to be 
certified as compliant with the new meal pattern. Allowing for more 
grain and meat/meat alternates has also increased student acceptability 
of the new meals they are being served.
    Therefore, FNS is making this flexibility permanent by including it 
in this final rule at 7 CFR 210.7(d)(1). Because ongoing compliance 
with the meal patterns is assessed during administrative reviews, FNS 
is further extending this flexibility by including in the final rule at 
7 CFR 210.18(g)(2)(vi). When conducting administrative reviews, State 
agencies should consider any SFA compliant with the weekly ranges for 
grains and meats if the weekly minimums are met. SFAs continue to be 
required to meet the weekly minimum and maximum range requirements for 
calories and the other dietary specifications.
    In addition to concerns about the maximums for grains and meats, 
FNS received feedback from State and SFA partners concerning the 
requirement that frozen fruit served in the NSLP contain no added 
sugar.
    Since 2009, USDA has reduced the amount of added sugars in frozen 
fruits offered to States; however most frozen strawberries, peaches and 
apricots offered by USDA currently contain added sugar. USDA has 
reached out to industry concerning reformulating these frozen fruits 
products to eliminate sugar completely, and industry has been working 
on this issue since publication of the meal pattern rule. Reformulating

[[Page 327]]

some products has been challenging because sugar acts as an important 
ingredient in maintaining fruit flavor, appearance, texture and 
storability of certain frozen fruits. In addition, research on 
substitute sweeteners has not been successful in maintaining the color, 
flavor or texture of the fruit being tested.
    In response to these concerns, FNS issued SP 20-2012 on February 
24, 2012 and a revised version on September 11, 2012 (http://www.fns.usda.gov/cnd/governance/Policy-Memos/2012/SP20-2012osr.pdf), 
providing SFAs the flexibility to continue to use frozen fruit products 
containing added sugar through SY 2013-14. This was later expanded in 
SP 49-2013 issued on June 25, 2013, to include both lunch and breakfast 
through SY 2014-15 (http://www.fns.usda.gov/sites/default/files/SP49-2013os.pdf). In an effort to ease burden on program operators, this 
flexibility was applicable to all frozen fruit products.
    Feedback on the memoranda has been positive with numerous requests 
to extend the flexibility for frozen fruit with added sugar. Thus far, 
research performed by several different processors for development of 
an acceptable no-sugar frozen fruit has resulted in an unacceptable 
product. Processors do not believe a short term solution is feasible as 
their research requires long term studies because many of the problems 
with frozen fruit do not develop until the products have been in 
storage for a reasonable time.
    In addition to the challenges associated with processing frozen 
fruit without sugar, allowing SFAs to use frozen fruit with added sugar 
will make it less complicated for SFAs to meet meal pattern 
requirements, and also expand the types of frozen fruit allowable in 
school meals. It is also consistent with canned fruits since some added 
sugar is allowed in canned products. Additionally, the calorie limits 
for meals help preserve the integrity of the updated nutrition 
standards, as schools have to plan menus and select products carefully, 
including frozen fruit with added sugar, in order to be in compliance 
with the standards.
    For those reasons, FNS is making this flexibility permanent by 
including it in this final rule at 7 CFR 210.7(d)(1)(iii)(B). Because 
ongoing compliance with the meal patterns is assessed during 
administrative reviews, FNS is further extending this flexibility by 
including it in the final rule at 7 CFR 210.18(g)(2)(vi). When 
conducting administrative reviews, State agencies should consider any 
SFA compliant with the meal pattern requirements even if the SFA serves 
frozen fruit containing added sugar. This flexibility is also 
applicable to fruit offered in the School Breakfast Program.

Training

    Several comments from SFAs requested that FNS and State agencies 
provide training on the certification process, how to complete 
certification documentation, and allowable uses of administrative funds 
provided pursuant to amendments made by Section 201 of the HHFKA.
    In recognition of the significance of changes necessitated by the 
new regulatory requirements, section 201 of the HHFKA amended section 
4(b)(3)(F) of the NSLA authorizes the Secretary to provide up to $47 
million to States for each of two years to assist in the implementation 
of the updated meal patterns, including training, technical assistance, 
and conducting performance-based certifications. States are using these 
funds to provide trainings and technical assistance to SFAs.
    To address comments about the effective use of section 201 
administrative funds, FNS issued two guidance memoranda to provide 
additional information on allowable uses of these administrative funds. 
Most recently, on December 6, 2012, FNS issued SP 13-2013 (http://www.fns.usda.gov/cnd/governance/Policy-Memos/2013/SP13-2013os.pdf) 
which provided several best practices State agencies may consider in 
using these administrative funds to help SFAs implement the new meal 
pattern.
    To support State agency efforts to provide technical assistance and 
training, FNS offered States the option of postponing administrative 
reviews for School Year 2012-13. By providing this flexibility, FNS 
expected State agencies to use this time to certify SFAs and train SFAs 
that need assistance in becoming certified.
    In addition, since the publication of the interim final rule, FNS 
has conducted several in-person trainings across the Nation. The 
webinars will help ensure both State agencies and SFAs understand the 
certification process and how to complete and evaluate certification 
materials.
    FNS will continue to provide technical assistance and guidance, as 
needed, but no changes will be made in this final rule in regards to 
training.

Non-Discretionary Items

    Several comments related to parts of the regulation over which FNS 
does not have discretion. Specifically, many comments indicated that 6 
cents per lunch is insufficient to cover the costs associated with the 
new meal pattern requirements. The 6 cents per meal performance-based 
reimbursement was specifically established in the HHFKA; and therefore, 
FNS does not have discretion to increase the reimbursement rate. 
However, commenters should be aware that the HHFKA provided for annual 
adjustment to reflect changes in the cost of operating the meal 
programs, as indicted by the change in the series for food away from 
home of the Consumer Price Index for all Urban Consumers, published by 
the Bureau of Labor Statistics of the Department of Labor.
    Several commenters felt that breakfast should not be included as 
part of 6 cents certification. However, as indicated in the preamble of 
the interim final rule, the statutory authority for the performance-
based reimbursement requires that breakfast must be evaluated as part 
of the certification process. Further discussion of this issue is found 
in the Federal Register at 77 FR 25025.

IV. Procedural Matters

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This final rule has been designated an ``economically significant 
regulatory action,'' under section 3(f) of Executive Order 12866. 
Accordingly, the rule has been reviewed by the Office of Management and 
Budget.

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Pursuant 
to that review, it has been determined that this rule will not have a 
significant impact on a substantial number of small entities.
    While there may be some SFA burden associated with initial 
certification for the performance-based reimbursement in this rule, the 
burden will not be significant and will be outweighed by

[[Page 328]]

the benefits of increased Federal reimbursement for school lunches.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Department generally must prepare a written statement, including a 
cost/benefit analysis, for proposed and final rules with Federal 
mandates that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Department to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, more cost-effective or least burdensome 
alternative that achieves the objectives of the rule. This rule does 
not contain Federal mandates (under the regulatory provisions of Title 
II of the UMRA) that impose costs on State, local, or tribal 
governments or to the private sector of $100 million or more in any one 
year. This rule is, therefore, not subject to the requirements of 
sections 202 and 205 of the UMRA.

Executive Order 12372

    The National School Lunch Program and School Breakfast Program are 
listed in the Catalog of Federal Domestic Assistance under No. 10.555 
and 10.553. For the reasons set forth in the final rule in 7 CFR part 
3015, Subpart V and related notice (48 FR 29115, June 24, 1983), this 
program is included in the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials. 
In developing this rule, FNS gathered input from State and local 
program operators, and other stakeholders, via listening sessions held 
at the School Nutrition Association Legislative Action Conference in 
March 2012, and at the School Nutrition Association Annual National 
Conference in July 2012. Additionally, FNS held a State agency meeting 
to discuss issues pertaining to the new meal pattern and certification 
in December 2012.

Executive Order 13132

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13132.
    Prior Consultation with State Officials:
    Prior to drafting this final rule, FNS staff received informal 
input from various stakeholders while participating in various State, 
regional, national, and professional conferences. The School Nutrition 
Association, the Center for Science in the Public Interest, and the 
American Dietetic Association shared their views about performance-
based reimbursement. Numerous stakeholders, including State agencies 
and local program operators, also provided input at public meetings 
held by the School Nutrition Association.
    Nature of Concerns and the Need to Issue this Rule:
    State agencies and SFAs want to provide the best possible school 
meals through the NSLP and SBP but are concerned about the costs and 
administrative burden associated with increased program oversight. 
While FNS is aware of these concerns, Section 4(b)(3)(D) of the Richard 
B. Russell National School Lunch Act, 42 U.S.C. 1753(b)(3)(D), requires 
that State agencies certify whether SFAs are in compliance with meal 
pattern and nutrition standards, and disburse performance-based 
reimbursement to eligible SFAs.
    Extent to Which We Meet Those Concerns:
    FNS has considered the impact of this final rule on State and local 
program operators and has attempted to develop a rule that would 
implement the performance-based reimbursement in the most effective and 
least burdensome manner. FNS recognizes that implementing the new 
performance-based reimbursement certification process will require a 
significant effort on the part of State and local program operators. 
This final rule simplifies the certification process by allowing State 
agencies to consider any SFA compliant with the component requirements 
for grains and meat/meat alternates if the menu is compliant with the 
daily and weekly minimums for these components. Additionally, FNS has 
provided several trainings and guidance to ensure State agencies 
understand performance-based funding requirements and provide SFAs with 
the training and technical assistance needed to implement the improved 
school meal patterns. Finally, per the requirements of the HHFKA, FNS 
provided $47 million to State agencies in fiscal years 2012 and 2013 to 
assist with meal pattern implementation, training, technical 
assistance, and performance-based certification activities. These funds 
are available for obligation by State agencies through September 2015.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless specified in the DATES section of the final rule. Prior to any 
judicial challenge to the provisions of this rule or the application of 
its provisions, all applicable administrative procedures must be 
exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with Departmental 
Regulations 4300-4, ``Civil Rights Impact Analysis'', and 1512-1, 
``Regulatory Decision Making Requirements.'' After a careful review of 
the rule's intent and provisions, FNS has determined that this rule is 
not intended to limit or reduce in any way the ability of protected 
classes of individuals to receive benefits on the basis of their race, 
color, national origin, sex, age or disability nor is it intended to 
have a differential impact on minority owned or operated business 
establishments, and woman-owned or operated business establishments 
that participate in the Child Nutrition Programs.

Paperwork Reduction Act

    FNS reduced the data required for the quarterly report associated 
with this final rule. In the interim rule, FNS required State agencies 
to submit a quarterly report detailing the disbursement of performance-
based reimbursement, including the total number of SFAs in the State, 
the names and locations of certified SFAs, and the total number of 
lunches earning the performance-based reimbursement for each month. The 
burden estimate for this quarterly report was one hour. FNS received 
comments from State agencies that some of this information would be 
particularly difficult and/or burdensome to report by SFAs.
    In an effort to reduce burden, this rule finalizes a reporting 
change at 7 CFR 210.5(d)(2)(ii) to require that State agencies only 
include in this quarterly report the total number of SFAs in the State 
and the names of certified SFAs.

[[Page 329]]

This reduces the estimated burden for State agencies from one hour per 
quarterly report to 15 minutes per quarterly report.
    In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. 
Chapter 35), the information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0584-0567, Certification of Compliance with Meal 
Requirements for the National School Lunch Program Under the Healthy, 
Hunger-Free Kids Act of 2010.

E-Government Act Compliance

    The Food and Nutrition Service is committed to complying with the 
E-Government Act, 2002 to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    Executive Order 13175 requires Federal agencies to consult and 
coordinate with tribes on a government-to-government basis on policies 
that have tribal implications, including regulations, legislative 
comments or proposed legislation, and other policy statements or 
actions that have substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or distribution of power and responsibilities between the 
Federal government and Indian tribes.
    FNS provides regularly scheduled quarterly consultation sessions as 
a venue for collaborative conversations with Tribal officials or their 
designees. The most recent Quarterly Consultation Conference Calls were 
coordinated by FNS and held on the following dates: November 2, 2011; 
February 29, 2012; May 2, 2012; August 29, 2012; February 13, 2013.
    There were no comments about this regulation received during any of 
the aforementioned Tribal Consultation sessions. Reports from these 
consultations are part of the USDA annual reporting on Tribal 
consultation and collaboration. FNS will respond in a timely and 
meaningful manner to Tribal government requests for consultation 
concerning this rule.

Regulatory Impact Analysis Summary

    As required for all rules that have been designated significant by 
the Office of Management and Budget, a Regulatory Impact Analysis (RIA) 
was developed for this final rule. The following is a summary of the 
RIA. The full RIA is included as an Appendix to this rule.

Need for Action

    Section 201 of the Healthy Hunger-Free Kids Act of 2010 provides 
for a 6 cent per lunch performance-based reimbursement to SFAs that 
comply with the National School Lunch program (NSLP) and School 
breakfast Program (SBP) meal standards that took effect on July 1, 
2012. This rule finalizes the interim rule's regulatory framework for 
establishing initial school food authority (SFA) compliance with the 
new meal standards and for monitoring ongoing compliance. In addition, 
the final rule makes minor changes to the interim rule that are 
intended to facilitate the certification of SFA compliance with the 
meal patterns.

Benefits

    The impact analysis for the interim rule estimated that full 
compliance with the new meal patterns would increase SFA revenues by 
more than $300 million per year in the aggregate. The changes contained 
in the final rule are expected to facilitate compliance with the meal 
patterns, allowing SFAs to take full advantage of the additional 
revenue. Granting some flexibility on meat, grains, and frozen fruit is 
an effort by USDA to work with schools that are making serious efforts 
to comply with the rule's standards but are having some difficulty 
finding products that have been resized or reformulated specifically to 
meet the requirements of the rule. To the extent that a little 
flexibility at the margins encourages schools to plan menus that meet 
the new standards, students benefit from receiving meals that comply 
with the new standards rather than receiving meals that do not comply 
with the new standards.
    Even with the added flexibility, schools have to meet all of the 
meal patterns' minimum food group requirements and stay within its 
calorie maximums. The benefits to children who consume school meals 
that follow DGA recommendations are detailed in the impact analysis 
prepared for the final meal patterns rule.\1\ As discussed in that 
document, the 2010 Dietary Guidelines Advisory Committee emphasizes the 
importance of a diet consistent with DGA recommendations as a 
contributing factor to overall health and a reduced risk of chronic 
disease.\2\ The new meal patterns are intended not only to improve the 
quality of meals consumed at school, but to encourage healthy eating 
habits generally. Those goals of the meal patterns rule are furthered 
to the extent that this rule contributes to full compliance with the 
meal patters by all SFAs.
---------------------------------------------------------------------------

    \1\ Federal Register, Vol. 77, No. 17 pp. 4088-4167.
    \2\ Report of the Dietary Guidelines Advisory Committee on the 
Dietary Guidelines for Americans, 2010, p. B1-2. (http://www.cnpp.usda.gov/DGAs2010-DGACReport.htm).
---------------------------------------------------------------------------

    Further, the changes adopted in the final rule are intended to 
facilitate SFA compliance with the meal pattern requirements and reduce 
State agency reporting and recordkeeping burden. By making permanent 
the flexibility on weekly maximum servings of grains and meat/meat 
alternates, and by allowing frozen fruit with added sugar to credit 
toward the meal pattern requirement for fruit, the final rule will make 
it easier for some SFAs to plan menus that comply with the meal pattern 
requirements. The effect of these provisions is to reduce the costs of 
compliance for the small minority of SFAs that would otherwise not have 
been certified eligible to receive the performance-based 6 cent 
reimbursement by the end of SY 2013-2014, though we do not estimate 
those potential cost savings in this analysis.\3\ The savings generated 
by reducing State agency reporting and recordkeeping burden is 
minimal.\4\
---------------------------------------------------------------------------

    \3\ Since these provisions are options (not requirements) and 
because we have no data on how many schools might avail themselves 
of these options, we do not estimate those cost savings in this 
analysis.
    \4\ Although the relative burden decrease of 75% seems 
substantial, the absolute burden decrease (as measured in the dollar 
value of State agency staff time) is only about $4,000 per year 
across the entire United States.
---------------------------------------------------------------------------

Costs

    These provisions will likely result in a small increase in cost to 
the Federal Government (as a result of a small number of schools 
receiving the performance-based reimbursement that might have otherwise 
not received it), though we expect this potential increase to fall 
within the cost range estimated for the interim final rule.\5\
---------------------------------------------------------------------------

    \5\ Federal Register, Vol. 77, No. 82 pp. 25024-25036.
---------------------------------------------------------------------------

List of Subjects in 7 CFR Part 210

    Grant programs-education; Grant programs-health; Infants and 
children; Nutrition; Penalties; Reporting and recordkeeping 
requirements; School breakfast and lunch programs; Surplus agricultural 
commodities.

    Accordingly, the interim final rule published at 77 FR 25024 on 
April 27, 2012, is adopted as final with the following changes:

[[Page 330]]

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

0
1. The authority citation for part 210 continues to read as follows:

    Authority:  42 U.S.C. 1751-1760, 1779.


0
2. Amend Sec.  210.5 by revising paragraph (d)(2)(ii) to read as 
follows:


Sec.  210.5  Payment process to States.

* * * * *
    (d) * * *
    (2) * * *
    (ii) Each State agency shall also submit a quarterly report, as 
specified by FNS, detailing the disbursement of performance-based cash 
assistance described in Sec.  210.4(b)(1). Such report shall be 
submitted no later than 30 days after the end of each fiscal year 
quarter. State agencies will no longer be required to submit the 
quarterly report once all SFAs in the State have been certified. The 
report shall include the total number of school food authorities in the 
State and the names of certified school food authorities.
* * * * *

0
3. Amend Sec.  210.7 by redesignating paragraphs (d)(1)(iii) through 
(vii) as paragraphs (d)(1)(iv) through (viii) and adding a new 
paragraph (d)(1)(iii) to read as follows:


Sec.  210.7  Reimbursement for school food authorities.

* * * * *
    (d) * * *
    (1) * * *
    (iii) State agencies must review certification documentation 
submitted by the school food authority to ensure compliance with meal 
pattern requirements set forth in Sec.  210.10, Sec.  220.8, or Sec.  
220.23, as applicable. For certification purposes, State agencies 
should consider any school food authority compliant:
    (A) If when evaluating daily and weekly range requirements for 
grains and meat/meat alternates, the certification documentation shows 
compliance with the daily and weekly minimums for these two components, 
regardless of whether the school food authority has exceeded the 
maximums for the same components.
    (B) If when evaluating the service of frozen fruit, the school food 
authority serves products that contain added sugar.
* * * * *

0
4. Amend Sec.  210.18 by adding paragraph (g)(2)(vi) to read as 
follows:


Sec.  210.18  Administrative reviews.

* * * * *
    (g)* * *
    (2)* * *
    (vi) For purposes of paragraphs (g)(2)(i) through (v) of this 
section, State agencies should consider any school food authority 
compliant:
    (A) If when evaluating daily and weekly range requirements for 
grains and meat/meat alternates, the documentation shows compliance 
with the daily and weekly minimums for these two components, regardless 
of whether the school food authority have exceeded the maximums for the 
same components.
    (B) If when evaluating the service of frozen fruit, the school food 
authority serves products that contain added sugar.
* * * * *

    Dated: December 24, 2013.
Kevin Concannon,
Under Secretary, Food, Nutrition and Consumer Services.

    Note: The following appendix will not appear in the Code of 
Federal Regulations

Appendix A

Regulatory Impact Analysis

    Agency: Food and Nutrition Service.
    Title: Certification of Compliance with Meal Requirements for 
the National School Lunch Program under the Healthy, Hunger-Free 
Kids Act of 2010.
    Nature of Action: Final Rule.
    Need for Action: Section 201 of the Healthy Hunger-Free Kids Act 
of 2010 provides for a 6 cent per lunch performance-based 
reimbursement to SFAs that comply with the National School Lunch 
program (NSLP) and School Breakfast Program (SBP) meal standards 
that took effect on July 1, 2012. This rule finalizes the interim 
rule's regulatory framework for establishing initial school food 
authority (SFA) compliance with the new meal standards and for 
monitoring ongoing compliance. In addition, the final rule makes 
minor changes to the interim rule that are intended to facilitate 
the certification of SFA compliance with the meal patterns.
    Affected Parties: The programs affected by this rule are the 
NSLP and the SBP. The parties affected by this regulation are local 
school food authorities, State education agencies and the USDA.

Contents

I. Background
II. Need for Action
III. Key Provisions of the Interim Rule
IV. Key Provisions of the Final Rule
V. Addressing Comments on the Interim Rule and RIA
    A. Concerns About State Administrative Costs
    B. Concerns About Certification Costs
VI. Cost/Benefit Assessment
    A. Final Rule
    1. Benefits
    2. Costs and Transfers
    B. Updated Analysis of Interim Rule Effects
    1. Methodology
    2. Administrative Costs
    3. Uncertainties
    4. Benefits
VII. Alternatives
VIII. Accounting Statement

I. Background

    The National School Lunch Program (NSLP) is available to over 50 
million children each school day; an average of 31.6 million 
children per day ate a reimbursable lunch in fiscal year (FY) 2012. 
Schools that participate in NSLP receive Federal reimbursement and 
USDA Foods (donated commodities) for meals that meet program 
requirements.
    Sections 4 and 11 of the Richard B. Russell National School 
Lunch Act (NSLA) govern the Federal reimbursement of school lunches. 
Reimbursement for school breakfasts is governed by Section 4(b) of 
the Child Nutrition Act. Reimbursement rates for both NSLP and SBP 
meals are adjusted annually for inflation under terms specified in 
Section 11 of the NSLA.
    Federal reimbursement for program meals and the value of USDA 
Foods totaled $14.9 billion in FY 2012. Table 1 summarizes FNS 
projections of reimbursable meals served and the value of Federal 
reimbursements and USDA Foods through FY 2017.
    The baseline for this analysis is the cost estimate published 
with the interim final rule.\6\
---------------------------------------------------------------------------

    \6\ Federal Register, Vol. 77, No. 82 pp. 25024-25036.

                  Table 1--Projected Number of Meals Served and Total Federal Program Costs \7\
                                                  [in billions]
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal year
                                 -------------------------------------------------------------------------------
                                       2013            2014            2015            2016            2017
----------------------------------------------------------------------------------------------------------------
NSLP
    Lunches Served..............             5.3             5.4             5.4             5.4             5.5

[[Page 331]]

 
    Program Cost................           $12.3           $12.6           $12.7           $12.9           $13.0
SBP
    Breakfasts Served...........             2.3             2.4             2.4             2.5             2.5
    Program Cost................            $3.6            $3.8            $4.0            $4.1            $4.2
----------------------------------------------------------------------------------------------------------------
\7\ USDA projections of reimbursable lunches and breakfasts served, and total NSLP and SBP program costs,
  prepared for the FY 2014 President's Budget. NSLP program cost includes entitlement commodity assistance, but
  is not adjusted for the projected additional amount necessary to bring total commodity assistance up to 12
  percent of the combined value of the Section 4 and 11 reimbursements as required by NSLA section 6(e) (42
  U.S.C. 1755(e)). Note that the estimate for the cost of NSLP as given in on p. 175 of the 2014 President's
  budget appendix does not include estimated entitlement commodity assistance, unlike Table 1. In addition,
  although the USDA projections in the FY 2014 President's Budget included the cost of the extra 6 cents per
  meal (and assumed that all meals served would be eligible for the extra 6 cents per meal), the projections
  presented here do not include the value of the 6 cents--instead, program costs are presented as if no meals
  receive the 6 cents reimbursement, to provide a basis for comparison for the rest of the estimates in this
  RIA. The projected number of meals has changed from the estimated projections in the interim rule on account
  of updated projections provided in the 2014 President's Budget.

    Table 2 provides additional detail on the components of the 
school year (SY) 2012-2013 Federal reimbursement rates for lunches 
and breakfasts that meet program requirements. The figures in Table 
2 exclude the 6 cents for meals that comply with the new meal 
patterns.

                                  Table 2--Federal per-Meal Reimbursement and Minimum Value of USDA Foods, SY 2012-2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Breakfast reimbursement                        Lunch reimbursement                          Minimum
                                                 -------------------------------------------------------------------------------------------   value of
                                                    Section 4(b) of Child        Section 4 NSLA                     Combined Reimbursement,    donated
                                                        Nutrition Act      --------------------------                NSLA Sections 4 & 11       foods
                                                 --------------------------                                       --------------------------------------
                                                                             SFAs that    SFAs that                 SFAs that    SFAs that
                                                                            serve fewer    serve at    Section 11  serve fewer    serve at    Additional
                                                   Schools in  Schools not  than 60% of   least 60%       NSLA     than 60% of   least 60%     Federal
                                                    ``Severe   in ``Severe    lunches     of lunches                 lunches     of lunches   assistance
                                                     Need''       Need''     free or at   free or at                free or at   free or at    for each
                                                                              reduced      reduced                   reduced      reduced     NSLP lunch
                                                                               price        price                     price        price        served
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Contiguous States
--------------------------------------------------------------------------------------------------------------------------------------------------------
Free............................................        $1.85        $1.55        $0.27        $0.29        $2.59        $2.86        $2.88      $0.2275
Reduced Price...................................         1.55         1.25         0.27         0.29         2.19         2.46         2.48       0.2275
Paid............................................         0.27         0.27         0.27         0.29         n.a.         0.27         0.29       0.2275
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Alaska
--------------------------------------------------------------------------------------------------------------------------------------------------------
Free............................................        $2.97        $2.48        $0.44        $0.46        $4.19        $4.63        $4.65      $0.2275
Reduced Price...................................         2.67         2.18         0.44         0.46         3.79         4.23         4.25       0.2275
Paid............................................         0.41         0.41         0.44         0.46         n.a.         0.44         0.46       0.2275
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Hawaii
--------------------------------------------------------------------------------------------------------------------------------------------------------
Free............................................        $2.16        $1.81        $0.32        $0.34        $3.03        $3.35        $3.37      $0.2275
Reduced Price...................................         1.86         1.51         0.32         0.34         2.63         2.95         2.97       0.2275
Paid............................................         0.31         0.31         0.32         0.34         n.a.         0.32         0.34       0.2275
--------------------------------------------------------------------------------------------------------------------------------------------------------

II. Need for Action

    Section 201 of the Healthy, Hunger-Free Kids Act of 2010 (HHFKA) 
directs the USDA to issue regulations to update the NSLP and SBP 
meal patterns to align them with the Dietary Guidelines for 
Americans (DGA). The Department published a proposed rule in January 
2011.\8\ A final rule was published on January 26, 2012.\9\ The new 
standards took effect on July 1, 2012, the start of SY 2012-2013.
---------------------------------------------------------------------------

    \8\ Federal Register, Vol. 76, No. 9, pp. 2494-2570.
    \9\ Federal Register, Vol. 77, No. 17, pp. 4088-4167.
---------------------------------------------------------------------------

    HHFKA Section 201 also provides for a 6 cent increase to the 
USDA reimbursement for lunches served on or after October 1, 2012 
that meet the new meal standards. The interim rule provided the 
regulatory structure necessary to establish initial school food 
authority (SFA) compliance with the new meal standards and to 
monitor ongoing compliance. This final rule responds to concerns 
raised by comments given in response to the interim rule.

III. Key Provisions of the Interim Rule

    The interim rule included provisions that govern initial 
certification of SFA compliance with the breakfast and lunch meal 
patterns that took effect on July 1, 2012, ongoing monitoring of 
compliance by State agencies, consequences for non-compliance, and 
administrative responsibilities of SFAs and State agencies. SFAs 
began receiving an additional 6 cents for each reimbursable lunch 
served on or after October 1, 2012 that was determined to comply 
with the new meal standards. Key provisions of the interim rule 
included:
     Defining compliance: SFAs must be compliant with 
breakfast and lunch meal pattern requirements to receive the 
performance-based 6 cent lunch reimbursement. All meal components 
must be present in appropriate quantities. The meals offered to 
students must also comply

[[Page 332]]

with sodium, calorie, saturated fat, and trans fat standards.
     Initial certification of SFA eligibility for 
performance-based lunch reimbursement: SFAs may be certified 
eligible for the performance-based lunch reimbursement in one of 
several ways. Procedures for submitting certification documentation 
will be developed by State agencies. Final certification decisions 
will also be made by State agencies. However, standards for 
certification and the materials used in the certification process 
will be developed by FNS and specified in guidance. The interim rule 
provided for the following certification methods:
    i. Nutrient analysis: SFAs may submit to their State agency one 
week of each menu used by the SFA, along with the results of a 
nutrient analysis on each menu, and a menu worksheet.
    ii. Practices and indicators documentation: SFAs may submit to 
their State agency responses to a series of questions on program 
operations, a week of each menu used by the SFA, and a menu 
worksheet.
    iii. State agency reviews: SFAs may be certified in the process 
of a normal State agency administrative review. An SFA determined by 
the State agency to be compliant with all meal pattern and nutrient 
standards during an administrative review will be certified eligible 
for the performance-based lunch reimbursement.
    iv. HealthierUS School Challenge: Individual schools that 
receive HealthierUS School Challenge awards after July 1, 2012 will 
be certified eligible for the performance-based lunch reimbursement 
without further action by the school or SFA.
     Ongoing compliance: SFAs must be held compliant with 
meal pattern and nutrient standards at subsequent State 
administrative reviews to remain eligible for the performance-based 
lunch reimbursement.
     Consequences of non-compliance: SFAs that are 
determined non-compliant with meal pattern or nutrient standards, 
either through State review of the SFAs' initial certification 
materials, or in an initial or future State administrative review, 
will not be eligible (or will lose eligibility) for the performance-
based lunch reimbursement. State agencies that find SFAs to be non-
compliant with meal pattern or nutrient standards must provide 
technical assistance and encourage SFA corrective action and re-
application for certification.
     State agency validation reviews: State agencies must 
perform on-site validation reviews of a 25 percent random sample of 
certified SFAs during SY 2012-2013. Each validation review can 
substitute for an administrative review that the State agency would 
otherwise have to perform during SY 2012-2013.
     Federal assistance to State agencies: HHFKA Section 201 
provided $50 million in each of the fiscal years 2012 and 2013 to 
assist States with training, technical assistance, certification, 
and oversight. As provided by HHFKA, the preamble to the interim 
rule specified that $3 million would be retained for Federal 
administration and $47 million would be distributed to the States in 
each of these 2 years.

IV. Key Provisions of the Final Rule

    This rule finalizes the provisions of the interim rule, 
including the procedures for performance-based certifications, 
required documentation and timeframes, validation reviews, 
compliance and administrative reviews, reporting and recordkeeping, 
and technical assistance, with a few revisions:
     This final rule amends the reporting requirement at 7 
CFR 210.5(d)(2)(ii) to require that State agencies only include in 
their quarterly SFA performance-based certification report the total 
number of SFAs in the State and the names of certified SFAs. This 
represents a simplification of the reporting requirement from the 
interim rule. The change formalizes the simplification previously 
adopted by USDA and communicated to State agencies through Policy 
Memo SP 31-2012.
     This final rule at 7 CFR 210.7(d)(1) makes permanent a 
flexibility in requirements for weekly maximum grains and meat/meat 
alternates as originally outlined in Policy Memo SP 26-2013 and the 
flexibility for serving frozen fruit with added sugar as originally 
outlined in Policy Memo SP 20-2012. These changes make it easier for 
SFAs to meet the requirements of the school meals rule, which is a 
prerequisite for certification for the performance-based 
reimbursement.

V. Addressing Comments on the Interim Rule and RIA

    The interim rule generated about 200 comments. As noted in the 
preamble to the final rule, most of the comments pertained to either 
the school meals rule (e.g., commented on the new meal patterns) or 
to statutory requirements as set forth in HHFKA (e.g., commented on 
whether 6 additional cents are sufficient to cover the costs of the 
new meal patterns). As this RIA does not address the school meals 
rule and as FNS has no discretion to change the statutory 
requirements of the rule, this RIA will not address those comments.

A. Concerns About State Administrative Costs

    A few comments raised concerns about the cost of the States' 
quarterly reporting requirement on SFA certification. These comments 
viewed the reporting requirements as overly burdensome.
    In response to these concerns, FNS decreased the amount of 
information required from States in the quarterly report, as noted 
above. This change decreases the estimated time it takes one State 
to prepare and submit a quarterly certification report from one hour 
under the interim rule to 15 minutes under this final rule. These 
reports will no longer be required once all SFAs have been certified 
to receive the performance-based reimbursement.

B. Concerns About Certification Costs

    A few comments raised concerns about State or SFA administrative 
costs to comply with the certification process and with a lack of 
adequate guidance and training of State agency officials by FNS. 
Other comments indicated that small SFAs do not have the staff 
resources, computers, or computer skills necessary to develop 
compliant menus or to complete the certification process. Some 
comments questioned whether the additional administrative costs are 
worth the additional 6 cent reimbursement, and they raised concerns 
about SFAs' abilities to meet certification requirements in a timely 
manner.
    As noted in the preamble, FNS is encouraged by the number of 
SFAs that have already completed the certification process 
successfully. In October 2013, State agencies reported that, as of 
the end of June 2013, approximately 80 percent of all SFAs 
participating in the NSLP had submitted certification documentation 
to their respective State agency for review and certification, with 
more expected by the end of the school year. In addition, 90 percent 
of all lunches served in May 2013 received the extra 6 cent 
reimbursement.
    With regard to the training provided to State agencies by FNS, 
we note that FNS led in-person training sessions with every State 
agency to assist them with the task of helping SFAs navigate the 
certification process. FNS also developed webinars, spreadsheet 
tools, documentation, and other training resources to assist State 
agencies and SFAs. All of these resources remain available on the 
FNS Web site.\10\ The spreadsheet tools, in particular, are intended 
to assist SFAs that may not have the time or resources to develop or 
purchase their own software.\11\ FNS recognizes, however, that some 
SFAs may continue to have difficulty with the process despite these 
resources. FNS is committed to assisting those SFAs, and the State 
agency staff who are working with them, by answering additional 
questions on the certification process as we receive them. FNS also 
encourages the States to provide additional assistance to SFAs that 
have not yet submitted requests for certification.
---------------------------------------------------------------------------

    \10\ See http://www.fns.usda.gov/outreach/webinars/child_nutrition.htm and http://www.fns.usda.gov/cnd/Governance/Legislation/certificationofcompliance.htm.
    \11\ Some comments indicated that the FNS-developed spreadsheet 
tools were difficult to work with. While FNS will not be changing 
the tool at this time, FNS has conducted several in-person trainings 
and webinars to assist State agencies and SFA having difficulties 
using the tools. Additionally, the FNS Web site lists other 
commercially available tools that SFAs may find more appropriate or 
helpful.
---------------------------------------------------------------------------

    The final rule does not, however, change the requirements in the 
certification process. Consequently, we also make no fundamental 
change in the RIA concerning the costs of certification, although we 
do provide updated estimates of the cost of the interim rule based 
on the most recent data available. Nevertheless, we note that the 
other major change between the interim and final rule (i.e., making 
permanent the flexibility for weekly maximum grains and meat/meat 
alternates as original outlined in Policy Memo SP 26-2013 and the 
flexibility for serving frozen fruit with added sugar as originally 
outlined in Policy Memo SP 20-2012) should make it easier for SFAs 
to comply with the school meals rule (a prerequisite to becoming 
certified), though this does not change the certification process

[[Page 333]]

itself. As discussed in the preamble and below in Section VI.A.1., 
we do not find that making permanent these flexibilities negatively 
impacts the nutritional profile of NSLP meals.

VI. Cost/Benefit Assessment

A. Final Rule

1. Benefits

    The impact analysis for the interim rule \12\ (and updated 
below) estimated that full compliance with the new meal patterns 
would increase SFA revenues by more than $300 million per year in 
the aggregate. The changes contained in the final rule are expected 
to facilitate compliance with the meal patterns, allowing SFAs to 
take full advantage of the additional revenue. Granting some 
flexibility on meat, grains, and frozen fruit is an effort by USDA 
to work with schools that are making serious efforts to comply with 
the rule's standards but are having some difficulty finding products 
that have been resized or reformulated specifically to meet the 
requirements of the rule. To the extent that a little flexibility at 
the margins encourages schools to plan menus that meet the new 
standards, students benefit from receiving meals that comply with 
the new standards rather than receiving meals that do not comply 
with the new standards.
---------------------------------------------------------------------------

    \12\ Federal Register, Vol. 77, No. 82 pp. 25024-25036.
---------------------------------------------------------------------------

    The benefits to children who consume school meals that follow 
DGA recommendations are detailed in the impact analysis prepared for 
the final meal patterns rule.\13\ As discussed in that document, the 
2010 Dietary Guidelines Advisory Committee emphasizes the importance 
of a diet consistent with DGA recommendations as a contributing 
factor to overall health and a reduced risk of chronic disease.\14\
---------------------------------------------------------------------------

    \13\ Federal Register, Vol. 77, No.17 pp. 4088-4167.
    \14\ Report of the Dietary Guidelines Advisory Committee on the 
Dietary Guidelines for Americans, 2010, p. B1-2. (http://www.cnpp.usda.gov/DGAs2010-DGACReport.htm).
---------------------------------------------------------------------------

    The link between poor diets and health problems such as 
childhood obesity are a matter of particular policy concern given 
their significant social and economic costs. Obesity has become a 
major public health concern in the U.S., second only to physical 
activity among the top 10 leading health indicators in the United 
States Healthy People 2020 goals. According to data from the 
National Health and Nutrition Examination Survey 2007-2008, 34 
percent of the U.S. adult population is obese and an additional 34 
percent are overweight.\15\
---------------------------------------------------------------------------

    \15\ C.L. Ogden and M.D. Carroll (2010), ``Prevalence of 
Overweight, Obesity, and Extreme Obesity among Adults: United 
States, Trends 1976-1980 through 2007-2008,'' National Center for 
Health Statistics, June 2010, as cited in Food Labeling: Calorie 
Labeling of Articles of Food in Vending Machines, NPRM (2011). 
Preliminary Regulatory Impact Analysis, Docket No. FDA-2011-F-0171.
---------------------------------------------------------------------------

    The trend towards obesity is also evident among children; 33 
percent of U.S. children and adolescents are now considered 
overweight or obese,\16\ with current childhood obesity rates four 
times higher in children ages 6 to 11 than they were in the early 
1960s (19 vs. 4 percent), and three times higher (17 vs. 5 percent) 
for adolescents ages 12 to 19.\17\ These increases are shared across 
all socio-economic classes, regions of the country, and have 
affected all major racial and ethnic groups.\18\
---------------------------------------------------------------------------

    \16\ M.A. Beydoun and Y. Wang (2011), ``Socio-demographic 
disparities in distribution shifts over time in various adiposity 
measures among American children and adolescents: What changes in 
prevalence rates could not reveal,'' International Journal of 
Pediatric Obesity, 6:21-35, as cited in Food Labeling: Calorie 
Labeling of Articles of Food in Vending Machines, NPRM (2011). 
Preliminary Regulatory Impact Analysis, Docket No. FDA-2011-F-0171.
    \17\ Institute of Medicine (2007), Progress in Preventing 
Childhood Obesity: How do we Measure Up? Committee on Progress in 
Preventing Childhood Obesity, edited by J.P. Koplan, C.T. Liverman, 
V.I. Kraak, and S.L. Wisham, Washington, DC: The National Academies 
Press, p. 24.
    \18\ S.J. Olshansky, D.J. Passaro, R.C. Hershow, J. Layden, B.A. 
Carnes, J. Brody, L. Hayflick, R.N. Butler, D.B. Allison, and D.S. 
Ludwig (2005). ``A Potential Decline in Life Expectancy in the 
United States in the 21st Century,'' The New England Journal of 
Medicine, 352:1138-1145.
---------------------------------------------------------------------------

    Excess body weight has long been demonstrated to have health, 
social, psychological, and economic consequences for affected 
adults.\19\ Recent research has also demonstrated that excess body 
weight has negative impacts for obese and overweight children. 
Research focused specifically on the effects of obesity in children 
indicates that obese children feel they are less capable, both 
socially and athletically, less attractive, and less worthwhile than 
their non-obese counterparts.\20\
---------------------------------------------------------------------------

    \19\ J. Guthrie, C. Newman, and K. Ralston (2009), ``USDA School 
Meal Programs Face New Challenges,'' Choices: The Magazine of Food, 
Farm, and Resource Issues, 24 (available online at http://www.choicesmagazine.org/magazine/print.php?article=83); and Y. Wang, 
M.A. Beydoun, L. Liang, B. Cabellero and S.K. Kumanyika (2008), 
``Will all Americans Become Overweight or Obese? Estimating the 
Progression and Cost of the US Obesity Epidemic,'' Obesity, 16: 
2323-2330.
    \20\ A. Riazi, S. Shakoor, I. Dundas, C. Eiser, and S.A. 
McKenzie (2010), ``Health-related quality of life in a clinical 
sample of obese children and adolescents,'' Health and Quality of 
Life Outcomes, 8:134-139.
---------------------------------------------------------------------------

    Further, there are direct economic costs due to childhood 
obesity; $237.6 million (in 2005 dollars) in inpatient costs \21\ 70 
and annual prescription drug, emergency room, and outpatient costs 
of $14.1 billion.\22\
---------------------------------------------------------------------------

    \21\ L. Trasande, Y. Liu, G. Fryer, and M. Weitzman (2009), 
``Trends: Effects of Childhood Obesity on Hospital Care and Costs, 
1999-2005,'' Health Affairs, 28:w751-w760.
    \22\ J. Cawley (2010), ``The Economics of Childhood Obesity,'' 
Health Affairs, 29:364-371, as cited in Food Labeling: Calorie 
Labeling of Articles of Food in Vending Machines, NPRM (2011). 
Preliminary Regulatory Impact Analysis, Docket No. FDA-2011-F-0171.
---------------------------------------------------------------------------

    Childhood obesity has also been linked to cardiovascular disease 
in children as well as in adults. Freeman, Dietz, Srinivasan, and 
Berenson found that ``compared with other children, overweight 
children were 9.7 times as likely to have 2 [cardiovascular] risk 
factors and 43.5 times as likely to have 3 risk factors'' (p. 1179) 
and concluded that ``[b]ecause overweight is associated with various 
risk factors even among young children, it is possible that the 
successful prevention and treatment of obesity in childhood could 
reduce the adult incidence of cardiovascular disease'' (p. 
1175).\23\ It is known that overweight children have a 70 percent 
chance of being obese or overweight as adults. However, the actual 
causes of obesity have proven elusive.\24\ While the relationship 
between obesity and poor dietary choices cannot be explained by any 
one cause, there is general agreement that reducing total calorie 
intake is helpful in preventing or delaying the onset of excess 
weight gain.
---------------------------------------------------------------------------

    \23\ D.S. Freeman, W.H. Dietz, S.R. Srinivasan, and G.S. 
Berenson (1999), ``The Relation of Overweight to Cardiovascular Risk 
Factors Among Children and Adolescents: The Bogalusa Heart Study,'' 
Pediatrics, 103:1175-1182.
    \24\ ASPE, Health & Human Services (No Date), ``Childhood 
Obesity,'' Assistant Secretary for Planning and valuation, U.S. 
Department of Health & Human Services. Available online at http://aspe.hhs.gov/health/reports/child_obesity.
---------------------------------------------------------------------------

    There is some recent evidence that food standards can improve 
children's dietary quality:
     Taber, Chriqui, and Chaloupka compared calorie and 
nutrient intakes for California high school students--with food 
standards in place--to calorie and nutrient intakes for high school 
students in 14 States with no food standards.\25\ They concluded 
that California high school students consumed fewer calories, less 
fat, and less sugar at school than students in other States. Their 
analysis ``suggested that California students did not compensate for 
consuming less within school by consuming more elsewhere'' (p. 455). 
The consumption of fewer calories in school suggests that 
competitive standards ``. . . may be a method of reducing adolescent 
weight gain'' (p. 456).
---------------------------------------------------------------------------

    \25\ D.R. Taber, J.F. Chriqui, and F.J. Chaloupka (2012), 
``Differences in Nutrient Intake Associated With State Laws 
Regarding Fat, Sugar, and Caloric Content of Competitive Foods,'' 
Archives of Pediatric & Adolescent Medicine, 166:452-458.
---------------------------------------------------------------------------

     A study of competitive food policies in Connecticut 
concluded that ``removing low nutrition items from schools decreased 
students' consumption with no compensatory increase at home.'' \26\
---------------------------------------------------------------------------

    \26\ M.B. Schwartz, S.A. Novak, and S.S. Fiore (2009), ``The 
Impact of Removing Snacks of Low Nutritional Value from Middle 
Schools,'' Health Education & Behavior, 36:999-1011, p. 999.
---------------------------------------------------------------------------

     Similarly, researchers for Healthy Eating Research and 
Bridging the Gap found that ``[t]he best evidence available 
indicates that policies on snack foods and beverages sold in school 
impact children's diets and their risk for obesity. Strong policies 
that prohibit or restrict the sale of unhealthy competitive foods 
and drinks in schools are associated with lower proportions of 
overweight or obese students, or lower rates of increase in student 
BMI.'' \27\
---------------------------------------------------------------------------

    \27\ Healthy Eating Research and Bridging the Gap (2012), 
``Influence of Competitive Food and Beverage Policies on Children's 
Diets and Childhood Obesity,'' p. 3. Available online at http://www.healthyeatingresearch.org/images/stories/her_research_briefs/Competitive_Foods_Issue_Brief_HER_BTG_7-2012.pdf.

---------------------------------------------------------------------------

[[Page 334]]

    Pew Health Group and Robert Wood Johnson Foundation researchers 
noted that the prevalence of children who are overweight or obese 
has more than tripled in the past three decades,\28\ which is of 
particular concern because of the health problems associated with 
obesity. In particular, researchers found an increasing number of 
children are being diagnosed with type 2 diabetes, high cholesterol, 
and high blood pressure. These researchers further observed that 
children with low socioeconomic status and black and Hispanic 
children are at a higher risk of experiencing one or more of these 
illnesses (pp. 39-40, 56). Their analysis also noted that: [T]here 
is a strong data link between diet and the risk for these chronic 
diseases. Given the relationship between childhood obesity, calorie 
consumption, and the development of chronic disease risk factors at 
a young age, this report proposes that a national policy could alter 
childhood and future chronic disease risk factors by reducing access 
to certain energy-dense foods in schools. To the extent that the 
national policy results in increases in students' total dietary 
intake of healthy foods and reductions in the intake of low-
nutrient, energy-dense foods, it is likely to have a beneficial 
effect on the risk of these diseases. However, the magnitude of this 
effect would be proportional to the degree of change in students' 
total dietary intake, and this factor is uncertain (p. 68).
---------------------------------------------------------------------------

    \28\ Pew Health Group and Robert Wood Johnson Foundation (2012), 
Heath Impact Assessment: National Nutrition Standards for Snack and 
a la Carte Foods and Beverages Sold in Schools. Available online at 
http://www.pewhealth.org/uploadedFiles/PHG/Content_Level_Pages/Reports/KS%20HIA_FULL%20Report%20062212_WEB%20FINAL-v2.pdf.
---------------------------------------------------------------------------

    In summary, the most current, comprehensive, and systematic 
review of existing scientific research concluded that foods 
standards can have a positive impact on reducing the risk for 
obesity-related chronic diseases. Because the factors that 
contribute both to overall food consumption and to obesity are so 
complex, it is not possible to define a level of disease or cost 
reduction that is attributable to the changes in foods resulting 
from implementation of this rule. USDA is unaware of any 
comprehensive data allowing accurate predictions of the effect of 
increasing the flexibility in meeting certain dietary requirements 
by SFA's to certify compliance for the National program and 
subsequent changes in consumer choice and, especially among 
children. But to illustrate the magnitude of the potential benefits 
of a reduction in childhood obesity, based on $237.6 million in 
inpatient costs and $14.1 billion in outpatient costs, a one percent 
reduction in childhood obesity implies a $143 million reduction in 
health care costs.
    Some researchers have suggested possible negative consequences 
of regulating nutrition content in school foods. They argue that not 
allowing access to low nutrient, high calorie snack foods in schools 
may result in overconsumption of those same foods outside the school 
setting (although as noted earlier, Taber, Chriqui, and Chaloupka 
concluded overcompensation was not evident among the California high 
school students in their sample).
    The new meal patterns are intended not only to improve the 
quality of meals consumed at school, but to encourage healthy eating 
habits generally. Those goals of the meal patterns rule are 
furthered to the extent that this rule contributes to full 
compliance with the meal patterns by all SFAs.
    The changes adopted in the final rule (summarized in Section IV) 
are intended to facilitate SFA compliance with the meal pattern 
requirements and reduce State agency reporting and recordkeeping 
burden. By making permanent the flexibility on weekly maximum 
servings of grains and meat/meat alternates, and by allowing frozen 
fruit with added sugar to credit toward the meal pattern requirement 
for fruit, the final rule will make it easier for some SFAs to plan 
menus that comply with the meal pattern requirements.\29\
---------------------------------------------------------------------------

    \29\ As explained in this section and in the preamble to the 
rule, making permanent this flexibility does not compromise the 
nutritional profile of school meals. IOM's recommendations were to 
serve food in minimum amounts subject to maximum calorie limits; the 
additional flexibility allowed by these provisions is still subject 
to the maximum calorie limits for school meals.
---------------------------------------------------------------------------

    The added flexibility on weekly maximum servings of grains and 
meat/meat alternates will benefit SFAs who may continue to rely on 
prepared foods or recipes that ensure compliance with daily and 
weekly minimum quantities but may exceed weekly maximums in some 
weeks. However, because the meal patterns' weekly calorie 
requirements remain in place, the added flexibility on grains and 
meat/meat alternates is unlikely to have a significant effect on the 
overall quantity of food served, the cost of acquiring that food, or 
the nutritional profiles of the meals served.
    Allowing frozen fruit with added sugar to credit toward the meal 
patterns' fruit requirement also provides SFAs greater flexibility 
in purchasing foods for use in the school meal programs. Permitting 
schools to make use of a wider range of currently available frozen 
fruit products may reduce the administrative costs of finding and 
acquiring compliant foods for use in the meal programs. But, like 
the grains and meat/meat alternate provision, because the calorie 
limits are still in place, allowing added sugar in frozen fruit 
products will not undermine the updated nutrition standards.\30\
---------------------------------------------------------------------------

    \30\ We note that, in SY 2009-2010, frozen fruit accounted for 
only 17% of the fruit used by US schools. See p. 83 of USDA/FNS, 
School Food Purchase Study III (2012). Available online at http://www.fns.usda.gov/Ora/menu/Published/CNP/FILES/SFSPIII_Final.pdf.
---------------------------------------------------------------------------

    It is important to emphasize that menus developed by SFAs that 
are certified eligible for the additional 6 cent reimbursement must 
meet all of the minimum food group requirements contained in the 
final school meals rule, whether or not those SFAs take advantage of 
the added flexibilities of this rule. In addition, all SFAs are held 
to the same maximum calorie standards contained in the final school 
meals rule. Those standards are not meal-based. Instead, SFA 
compliance with the food group standards is assessed by comparing 
the weighted average amounts served across all meals served per day 
or in an entire week. Children in SFAs that are certified compliant 
under the modified standards of this rule will be served meals that 
satisfy the same minimum requirements as meals served in SFAs that 
were certified compliant under the original terms of the final 
school meals rule. Even in the absence of the flexibility added by 
this rule, the amount of meat and grains served in individual meals 
will vary significantly from the weighted average minimum and 
maximum amounts required over the course of a day or week. The 
changes in this rule recognize that additional flexibility on the 
upper end of the required range for meat and grains allows SFAs to 
use products that were formulated prior to the final school meal 
rule standards and to satisfy student demand. This rule does not 
offer SFAs a way to reduce the minimum amounts served from any of 
the food groups emphasized by the final school meal rule. And 
because this rule does not modify the final school meal rule's 
maximum calorie requirements, the new flexibility is limited and 
does not weaken the school meal standards' focus on childhood 
obesity.\31\
---------------------------------------------------------------------------

    \31\ The final rule's flexibility on sugar contained in frozen 
fruit is also constrained by the retention of the interim rule's 
calorie restrictions. Because the interim rule already allowed for 
added sugar in canned fruit, the final rule's modification of the 
frozen fruit standard is primarily a means to widen the selection of 
processed fruit available to SFAs under nutrient standards that are 
comparable to the standards already allowed under the interim rule 
for other processed fruit. In the absence of the final rule 
provision on frozen fruit with added sugar, SFAs remained free to 
serve canned fruit in light syrup rather fresh or processed fruit 
without added sugar.
---------------------------------------------------------------------------

    The final school meal rule establishes a primarily food-based 
set of requirements; these are designed to comply with the 
recommendations of the DGAs regarding the consumption of a variety 
of foods from key food groups. The school meal rule sets just a 
handful of macronutrient standards (for calories, saturated fat, 
sodium, and trans fat). The changes contained in this rule require 
SFAs to serve meals that satisfy the same minimum requirements from 
each of the food groups identified in the final school meal rule 
without relaxing any of that rule's macronutrient standards. In 
short, this rule's additional flexibility, designed to make it 
marginally easier to meet compliance with the new meal standards.
    Schools that adopt healthier food standards for their school 
lunch programs will improve the dietary intake for children at 
school and make it more likely that those students will have 
improved health outcomes. However, by allowing greater flexibility 
in meeting the school lunch dietary standards, it may be that some 
compliant SFAs relax their implementation of those guidelines 
somewhat.
    USDA has not quantified what changes may result to the overall 
nutritional content of SFAs availing themselves of those

[[Page 335]]

flexibility provisions. There are relatively few SFAs (relative to 
the total number of SFAs complying with school lunch dietary 
guidelines) that would significantly change the dietary composition 
of their school lunch program one way or the other. Those two 
effects (described above) are offsetting and so the net effects of 
these changes on the benefits to school children are likely to be 
marginal relative to the overall benefits afforded by the dietary 
standards.
    Because of the macronutrient requirement is not adjusted, any 
resulting changes to the nutritional quality of the NSLP and SBP 
meals served by SFAs are expected to marginal, and so there would 
likely be few changes to the benefits to children relative to the 
final school meal rule or to the interim rule on certification for 
the 6 cent reimbursement.

2. Costs and Transfers

    The baseline for our estimate of the cost of the final rule is 
the estimate for the interim final rule, which we update below using 
the latest President's Budget projections and preliminary data on 
certifications for the performance-based reimbursement.
    The provisions in the final rule will likely result in a small 
increase in cost to the Federal Government (as a result of a 
transfer of Federal funds in the form of additional performance-
based reimbursements to a small number of schools receiving the 
performance-based reimbursement that might have otherwise not 
received it), though we expect this potential increase to fall 
within the cost range estimated for the interim final rule, as 
updated below.
    The effect of the provisions in the final rule (i.e. increased 
flexibility on grains, meats, and frozen fruits with added sugar) is 
to reduce the costs of compliance for the small minority of SFAs 
that would otherwise not have been certified compliant with the new 
meal standards by the end of SY 2013-2014. The policy memos issued 
by FNS in September 2012 and February 2013 had already extended 
these provisions through the end of SY 2013-2014.
    These provisions are essentially administrative efficiency 
measures that will reduce meal pattern compliance costs at the 
margin for some SFAs; the provisions are not expected to have a 
significant effect on food costs. Since these provisions are options 
(not requirements) and because we have no data on how many schools 
might avail themselves of either of these options, we do not 
estimate those cost savings in this analysis.
    Given these assumptions about a phased certification process for 
some SFAs, the estimated cost of Federal performance-based 
reimbursements (and the value of additional SFA revenue) is $1.54 
billion through FY 2017 (1 percent less than the $1.55 billion 
estimated with full implementation).
    To the extent that the additional flexibilities afforded SFAs, 
this rule could result in marginally lower costs to SFAs relative to 
the interim final rule baseline. USDA has not quantified those 
changes as there are relatively few SFAs (relative to the total 
number of SFAs complying with school lunch dietary guidelines) that 
would significantly change the dietary composition of their school 
lunch program one way or the other.
    The added flexibility on weekly maximum servings of grains and 
meat/meat alternates could benefit SFAs who may continue to rely on 
prepared foods or recipes that ensure compliance with daily and 
weekly minimum quantities but may exceed weekly maximums in some 
weeks. That provision may reduce the administrative costs of meal 
planning for some SFAs, and may reduce the costs associated with 
modifying recipes or finding new prepared foods in the market with 
slightly different formulations than products currently purchased.
    Because the flexibility on grains, meat/meat alternates, and 
frozen fruit had previously been extended by FNS through SY 2013-
2014, the effect of these provisions on the initial certification of 
SFAs for the performance-based reimbursement is expected to be very 
small. Administrative data on certifications approved or pending 
through May 2013 indicate that only a small minority of SFAs are 
likely to remain uncertified by the end of SY 2013-2014. For those 
SFAs, these provisions may help reduce the costs of certification 
after that time.\32\ For all other SFAs, these provisions will make 
it marginally easier to maintain compliance with daily and weekly 
meal pattern requirements, a necessary condition for continued 
receipt of the performance-based reimbursement. We expect these 
provisions to generate a small but uncertain cost savings for SFAs 
through a small reduction in SFA compliance costs.
---------------------------------------------------------------------------

    \32\ As we note above, approximately 80 percent of SFAs had 
submitted documentation to their respective State agencies for 
review and certification as of June 2013. Administrative data also 
show that many SFAs are being certified retroactively as the 
processing of applications and approval of certification requests 
catch up with SFAs' documented compliance with the new meal 
patterns. With or without the changes contained in the final rule, 
State agency technical assistance will likely concentrate on this 
subset of uncertified SFAs during SY 2013-2014. Those efforts are 
likely to substantially reduce the number of non-certified SFAs by 
the end of SY 2013-2014. It is that remaining subset of SFAs that 
may benefit most from the permanent extension of the grains, meat/
meat alternate, and frozen fruit policy changes contained in the 
final rule.
---------------------------------------------------------------------------

    The rule also finalizes the change in State agency quarterly 
reporting requirement on SFA certification. That change, previously 
adopted through Policy Memo SP-31-2012, reduces quarterly State 
agency reporting burden to an estimated 15 minutes per quarter per 
State agency.\33\ The last change, contained in the preamble to the 
final rule, will eliminate the requirement that State agencies 
submit quarterly reports on SFA certification for the performance-
based rate increase once all SFAs have been certified. The 
administrative savings from this provision is minimal.\34\
---------------------------------------------------------------------------

    \33\ Estimate developed for Paperwork Reduction Act reporting 
and contained in the preamble to the rule. Because this change was 
already adopted by USDA through a policy memo, the reduction in 
burden for State agencies is part of our baseline, and the 
formalization of that policy by the final rule does not further 
reduce State agency reporting costs.
    \34\ Although the relative burden decrease of 75% seems 
substantial, the absolute burden decrease (as measured in the dollar 
value of State agency staff time) is only about $4,000 per year 
across the entire United States.
---------------------------------------------------------------------------

B. Updated Analysis of Interim Rule Effects

    The analysis provided below updates a similar analysis prepared 
for the interim rule impact analysis.\35\ We update the figures here 
using data on actual SFA certifications that were not available when 
the interim rule was published in April 2012, as well as new 
financial and participation projections provided in the 2014 
President's Budget. The data collected since April 2012 allows for a 
more precise estimate of SFA certifications and receipt of 
performance-based reimbursements in FY 2013 and projections for 
fiscal years 2014 through 2017. This analysis is presented for the 
information of those interested in the effects of the rule on SFAs, 
State agencies and USDA. It provides estimates of the economic 
impact of the rule overall, not just the incremental effects of the 
final rule.
---------------------------------------------------------------------------

    \35\ Federal Register, Vol. 77, No. 82 pp. 25024-25036.
---------------------------------------------------------------------------

    Two estimates are provided in recognition of the uncertainty of 
how quickly SFAs will be determined compliant with the new meal 
standards and, therefore, how soon they will be eligible for the 
performance-based rate increase. Data available as of October 2013 
shows that 73% of meals served in FY2013 have been certified for the 
performance-based reimbursement as of July 2013, with 90% of meals 
served in May 2013 certified as of July 2013. Given the rate of 
retroactive certification of SFAs and meals, our upper bound 
(primary) estimate assumes that all SFAs will be certified by the 
end of FY 2013 and that 80% of the lunches served in FY 2013 will 
eventually be certified to receive the additional 6 cent 
reimbursement.
    As of October 2013, administrative data that indicate that 80 
percent of SFAs had been certified or had submitted certification 
documentation to their respective State agency for review and 
certification by the end of June 2013. It assumes that the remaining 
20 percent of SFAs will be certified (or certified retroactively) in 
the remaining months of the fiscal year. Administrative data also 
indicate that 90 percent of meals served in May 2013 qualified for 
the extra 6 cent reimbursement, and that many SFAs are being 
certified retroactively as the processing of applications and 
approval of certification requests catch up with SFAs' documented 
compliance with the new meal patterns.\36\
---------------------------------------------------------------------------

    \36\ I.e., the number of meals certified for the performance-
based reimbursement in the early months of the school year increases 
with each additional month of administrative data reported by the 
States.
---------------------------------------------------------------------------

    Our alternate scenario relies on administrative data on 
certifications through the first several months of SY 2012-2013 to 
estimate the revenues and costs of a phased implementation that 
assumes full compliance during FY 2014. For both estimates, we 
assume that 80% of the meals served in FY 2013 will qualify for the 
additional 6 cent reimbursement; in the alternate estimate, we 
assume 95% of meals will qualify in FY 2014, and 100% will qualify 
in FY 2015 and beyond. In addition, in this second scenario

[[Page 336]]

we assume that roughly 90 percent of SFAs will be found compliant by 
the end of FY 2013, or certified compliant retroactively to the 
start of FY 2014. We further assume that the remaining 10% of SFAs 
will be certified sometime during FY 2014, and that 95% of FY 2014 
lunch reimbursements will include the performance-based 6 cents. We 
assume that 100 percent of SFAs (and, consequently, 100 percent of 
meals) will be certified to receive the performance-based 
reimbursement in FY 2015 and beyond.
     
---------------------------------------------------------------------------

    \37\ We note that the estimates in this table are largely 
consistent with the estimates published with the interim rule; the 
main differences are caused by (1) the exclusion of FY 2012 and the 
inclusion of FY 2017 in the above table, and (2) a small downward 
revision in the estimated number of lunches served in future Fiscal 
Years, resulting in an decrease in estimated Federal transfers to 
SFAs for reimbursable lunches. We also note that the 2014 
President's Budget likely overstates the final number of lunches 
that will be served in FY2013, but we use the 2014 President's 
Budget as our basis of analysis for consistency's sake, both for 
internal consistency and consistency with past estimates.

                            Table 3--Summary of Revenue and Cost Impact, Updated Estimate for Interim Rule, FY 2013-2017 \37\
                                                                       [millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Fiscal year
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                                          Total (FY 2013-
                                                               2013            2014            2015            2016            2017            2017)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Upper bound (primary) estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFAs and State agencies
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFA revenue (NSLP reimbursements).......................          $255.3          $321.3          $323.3          $325.4          $327.6        $1,553.0
Federal transfer to States for technical assistance.....            47.0             0.0             0.0             0.0             0.0            47.0
State agency and SFA reporting and recordkeeping........            -2.9              **              **              **              **            -2.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal
--------------------------------------------------------------------------------------------------------------------------------------------------------
Technical assistance to States..........................           -50.0            $0.0            $0.0            $0.0            $0.0           -50.0
NSLP reimbursements.....................................          -255.3          -321.3          -323.3          -325.4          -327.6        -1,553.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Alternate estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFAs and State agencies
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFA revenue (NSLP reimbursements).......................           255.3           305.2           323.3           325.4           327.6         1,536.9
Federal transfer to States for technical assistance.....            47.0             0.0             0.0             0.0             0.0            47.0
State agency and SFA reporting and recordkeeping........            -2.5            -0.4              **              **              **            -2.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal
--------------------------------------------------------------------------------------------------------------------------------------------------------
Technical assistance to States..........................           -50.0             0.0             0.0             0.0             0.0           -50.0
NSLP reimbursements.....................................          -255.3          -305.2          -323.3          -325.4          -327.6        -1,536.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
** Estimated at less than $50,000.
Note: Positive values indicate increase in revenues; negative values indicate increase in costs.

1. Methodology

    The estimated increase in the Federal cost of NSLP 
reimbursements is a straightforward calculation of the number of 
meals that are certified in compliance with the new meal standards 
times 6 cents (adjusted for inflation). This approach applies the 
additional 6 cents to USDA's baseline projection of lunches. The 6 
cents is subject to the same inflation adjustment applied to the 
Section 4 and Section 11 components of the lunch reimbursement, 
rounded down to the nearest cent.\38\ The interim rule inflates the 
6 cents separately from the Section 4 or Section 11 rates. Given our 
projected increase in the CPI Food Away from Home, we estimate that 
the 6 cents will remain unchanged through FY 2017.\39\
---------------------------------------------------------------------------

    \38\ The fractional cents are not lost; they are added back to 
the base rate before applying the next year's inflation adjustment.
    \39\ The CPI Food Away From Home Index is the factor specified 
by NSLA Section 11 to adjust the reimbursement rates for school 
lunch and breakfast. Our projected values for this index are those 
prepared by OMB for use in the 2014 President's Budget.
---------------------------------------------------------------------------

Full Implementation by October 1, 2013

    If all SFAs are certified eligible for the performance-based 6 
cent lunch rate increase as of October 1, 2013 (as assumed in the 
primary estimate), then the Federal cost and SFA revenue increase 
from FY 2013 through FY 2017 would total about $1.55 billion. This 
upper bound estimate (our primary estimate) assumes full compliance 
with the new breakfast and lunch meal patterns' food group and 
nutrient requirements by the start of (or retroactive to the start 
of) SY 2013-2014.
    The added revenue will be distributed across SFAs in proportion 
to the number of reimbursable lunches served. Because students 
eligible for free or reduced-price meals participate in the school 
meals programs at higher rates than other students, revenue per 
enrolled student will tend to be higher in SFAs with the greatest 
percentage of free and reduced-price certified students. However, 
eligibility for free or reduced price meals is not the only factor 
that impacts student participation in the NSLP. Other factors that 
vary by SFA include the distribution of students by grade level, 
prices charged for paid lunches, availability of offer vs. serve (in 
elementary and middle schools), the variety of entrees offered, and 
school geography.\40\
---------------------------------------------------------------------------

    \40\ School Nutrition Dietary Assessment Study-III, Vol. 2, 
Table IV.2. Mathematica Policy Research, Inc. for U.S. Department of 
Agriculture, Food and Nutrition Service, 2007. Available online at 
http://www.fns.usda.gov/ora/MENU/Published/CNP/cnp.htm.

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[[Page 337]]

    The data available do not allow us to account for each of those 
variables here. Instead we estimate the distribution of revenue 
across SFAs under the assumption that revenue is proportional to 
enrollment. Table 4 provides estimated revenue distributions across 
SFAs by SFA size, geography, and incomes of enrolled students.\41\
---------------------------------------------------------------------------

    \41\ Table 4 is based on SY 2009-2010 data for public local 
educational agencies (LEAs) from the Common Core of Data, U.S. 
Department of Education, National Center for Education Statistics. 
http://nces.ed.gov/ccd/. LEA and SFA boundaries are generally the 
same, but do vary in some instances.
    \42\ The distribution of States by Census region was taken from 
http://www.census.gov/geo/www/us_regdiv.pdf. The territories 
included here are Puerto Rico, the U.S. Virgin Islands, and the 
Commonwealth of the Northern Mariana Islands.
    The urbanicity categories are U.S. Department of Education, 
National Center for Education Statistics ``urban-centric local 
codes.'' ``City'' is any territory, regardless of size, that is 
inside an urbanized area and inside a principal city. ``Suburb'' is 
any territory, regardless of size, inside an urbanized area but 
outside a principal city. ``Town'' is a territory of any size inside 
an urban cluster but outside an urbanized area. ``Rural'' is a 
Census-defined rural territory outside both an urbanized area and an 
urban cluster. These definitions are contained in documentation for 
the SY 2009-2010 Common Core of Data, http://nces.ed.gov/ccd/.
    Percent of enrollment certified for free or reduced-price meals 
is also an NCES Common Core of Data variable.

         Table 4--Estimated Distribution of Additional Revenue From Performance-Based Rate Increase \42\
----------------------------------------------------------------------------------------------------------------
                                                                                          Share of new revenue:
                                                                                          primary estimate,  FY
                                                                  Percent of students          2013-17  (if
                                                                                             proportional to
                                                                                               enrollment)
----------------------------------------------------------------------------------------------------------------
                                                 LEA enrollment
----------------------------------------------------------------------------------------------------------------
1-500.........................................................                        3                    $42.8
501-1,000.....................................................                        4                     62.3
1,001-2,500...................................................                       11                    172.4
2,501-5,000...................................................                       14                    223.4
5,001-10,000..................................................                       15                    229.8
10,001-25,000.................................................                       19                    290.0
25,001-50,000.................................................                       15                    226.2
50,001 +......................................................                       20                    306.3
All...........................................................                      100                  1,553.0
----------------------------------------------------------------------------------------------------------------
                                                  Census region
----------------------------------------------------------------------------------------------------------------
Northeast.....................................................                       16                    251.8
Midwest.......................................................                       21                    332.7
South.........................................................                       37                    581.7
West..........................................................                       24                    370.6
Territories...................................................                        1                     16.2
All...........................................................                      100                  1,553.0
----------------------------------------------------------------------------------------------------------------
                                                   Urbanicity
----------------------------------------------------------------------------------------------------------------
City..........................................................                       31                    479.5
Suburb........................................................                       38                    584.8
Town..........................................................                       12                    183.3
Rural.........................................................                       20                    305.4
All...........................................................                      100                  1,553.0
----------------------------------------------------------------------------------------------------------------
                     Percent of enrollment certified for free or reduced price school meals
----------------------------------------------------------------------------------------------------------------
0.0-19.9%.....................................................                       14                    218.2
20.0-39.9%....................................................                       23                    361.1
40.0-59.9%....................................................                       33                    507.6
60.0-79.9%....................................................                       23                    350.5
80.0-100.0%...................................................                        7                    115.5
All...........................................................                      100                  1,553.0
----------------------------------------------------------------------------------------------------------------

Phased Implementation Within 2 Years

    As we note above, State agencies reported in October 2013 that 
more than 80 percent of all SFAs participating in the NSLP had 
submitted certification documentation to their respective State 
agency for review and certification by the end of June 2013, and 
that 90 percent of meals qualified for the higher reimbursement in 
May. Administrative data also show that many SFAs are being 
certified retroactively as the processing of applications and 
approval of certification requests catch up with SFAs' documented 
compliance with the new meal patterns. Consequently, we feel 
comfortable assuming for this alternate analysis that roughly 90 
percent of SFAs will be found compliant by the end of FY 2013, or 
certified compliant retroactively to the start of FY 2014.
    We further assume that the remaining 10% of SFAs will be 
certified sometime during FY 2014, and that 95% of FY 2014 lunch 
reimbursements will include the performance-based 6 cents. We assume 
that 100 percent of SFAs (and, consequently, 100 percent of meals) 
will be certified to receive the performance-based reimbursement in 
FY 2015 and beyond.
    Given these assumptions about a phased certification process for 
some SFAs, the estimated cost of Federal performance-based 
reimbursements (and the value of additional SFA revenue) is $1.54 
billion through FY 2017 (1 percent less than the $1.55 billion 
estimated with full implementation).

2. Administrative Costs

    Our updated estimate of administrative costs differs only 
slightly from the estimate published with the interim final 
rule.\43\ The only change is a slight shifting in when

[[Page 338]]

certification expenses were incurred (or are estimated to be 
incurred), based on administrative data on certifications received 
after publication of the interim rule, as well as accounting for 
additional wage inflation.
---------------------------------------------------------------------------

    \43\ Federal Register Vol. 77, No. 82 pp. 25024-25036.
---------------------------------------------------------------------------

    As most SFAs submitted documentary materials in FY 2012 or FY 
2013, most of the cost of this administrative burden was realized in 
those years, and we note that FY 2012 is not subject to this formal 
cost analysis. States reported 23.4 percent of SFAs were certified 
to receive the performance-based reimbursement for October 2012 and 
therefore incurred certification costs in FY2012. For purposes of 
our primary analysis, we assume that the remaining 76.6 percent did 
so by the end of FY 2013 (as described above, we currently only have 
data through June 2013).
    Based on this updated information on when certifications 
occurred, we estimate in our primary estimate that State agency and 
SFA administrative costs associated with the rule totaled $3.7 
million across FY 2012 and FY 2013 if all SFAs were determined 
compliant with the new meal standards based on an initial submission 
of SFA documentation. $2.9 million of these costs were realized in 
FY 2013 and are therefore included in the tables above. The ongoing 
burden created by reporting and recordkeeping requirements are not 
expected to be appreciably higher than they were before the 
implementation of the interim rule.
    Under our alternate scenario, we assume that an additional 66.6 
percent of SFAs submitted documentation by the end of FY 2013 and 
that the remaining 10 percent of SFAs did not submit applications to 
their State agencies in FY 2013.\44\ For this estimate, we assume 
that these SFAs will take the steps necessary to reach compliance in 
FY 2014, and will submit documentation to their State agencies in 
that fiscal year, so those certification costs for both the States 
and remaining SFAs are realized in FY 2014.
---------------------------------------------------------------------------

    \44\ Our alternate estimate of Federal reimbursements in Section 
V.B. assumes that 90 percent of SFAs will be certified compliant by 
the start of FY 2014, or retroactively back to the start of FY 2014. 
That allows for the possibility that fewer than 90 percent of SFAs 
will submit applications for certification before the end of FY 
2013. For the sake of simplicity, we assume in the alternative 
administrative cost section of this analysis that 90 percent of 
applications for certification are submitted before the end of FY 
2013.
---------------------------------------------------------------------------

    Administrative costs will be similar, but will be spread over 
two years under our alternate scenario of less than 100 percent SFA 
compliance with the new standards by the start of SY 2013-2014. The 
cost of preparing and processing initial certification claims in FY 
2012 and FY 2013 by 90 percent of SFAs will equal $3.4 million, of 
which $2.5 million was realized in FY 2013. The cost of submitting 
and processing the remaining claims will equal $0.4 million in FY 
2014.
    Due to inflation, SFAs and State agencies that submit or process 
documentation in FY 2014 will face slightly higher labor costs than 
those that submitted documentation in prior fiscal years, though 
this cost increase is too small to appear in our tables at the level 
of detail presented.

3. Uncertainties

    The most significant unknown in this analysis is the length of 
time it will take all SFAs to reach full compliance. Our primary 
revenue and cost estimate developed in the previous section assumes 
full compliance by October 2013.\45\ Our alternate estimate assumes 
that 10 percent of SFAs are certified compliant with the rule 
sometime in FY 2014.
---------------------------------------------------------------------------

    \45\ Note that, even though this RIA was most recently revised 
in October 2013, data were only available through June 2013.
---------------------------------------------------------------------------

    Because the economic effects are essentially proportionate to 
the level of SFA compliance, the effects of more or less optimistic 
scenarios can be estimated by scaling the effects of our alternate 
scenario upward or downward by the assumed rates of initial and 
future year compliance.
    Another important unknown is the student response to the 
introduction of new meal patterns. Although the introduction of 
healthier meals may attract new participants to the school meals 
program, the replacement or reformulation of some favorite foods on 
current school menus may depress participation, at least initially. 
As we did in the impact analysis for the school meal patterns rule, 
we provide alternate estimates given a 2 percent increase and a 2 
percent decrease in student participation. The estimates shown here 
are simply 2 percent higher (or lower) than our estimates in Table 
3. That is, we estimate the effect of changes in student 
participation on the value of the performance-based rate increase 
alone.
    Changes in participation would also affect the current Section 4 
and Section 11 reimbursements and student payments for paid and 
reduced price lunches. Because those effects are not a consequence 
of the 6 cent rate increase, but rather a consequence to the change 
in the content of the meals served, we exclude them from Table 5.
    Table 5 does not show the effects on administrative costs 
(reporting and recordkeeping by State agencies and SFAs, and the 
technical assistance funds transferred by the Federal government to 
the States). Those are unchanged from Table 3.

                                                       Table 5--Alternate Revenue and Cost Impacts
                                                                      [in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Fiscal year
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                                          Total (FY 2013-
                                                               2013            2014            2015            2016            2017            2017)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       2 Percent Increase in Student Participation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full Implementation
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFA revenue (NSLP reimbursements).......................          $260.5          $327.7          $329.8          $332.0          $334.1        $1,584.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Phased Implementation
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFA revenue (NSLP reimbursements).......................           260.6           311.3           329.8           332.0           334.1         1,567.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       2 Percent Decrease in Student Participation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full Implementation
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFA revenue (NSLP reimbursements).......................           250.2           314.8           316.9           318.9           321.0         1,521.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Phased Implementation
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFA revenue (NSLP reimbursements).......................           250.2           299.1           316.9           318.9           321.0         1,506.2
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 339]]

4. Benefits

    The interim rule will result in a transfer from the Federal 
government to SFAs of as much as $1.55 billion through FY 2017 to 
implement the new breakfast and lunch meal patterns that took effect 
on July 1, 2012. The Federal cost is fully offset by an identical 
benefit to SFAs and State agencies.
    The interim rule generates significant additional revenue for 
SFAs that partially offset the additional food and labor costs to 
implement the improved meal standards more fully aligned with the 
Dietary Guidelines for Americans. For example, USDA previously 
estimated that the improved meal standards would cost an additional 
$1,220.2 million in FY 2015 (the first year in which the new 
standards are fully implemented).\46\ The rule will generate $323.3 
million in additional SFA revenue in the same fiscal year, helping 
school districts cover about 26% of this additional cost. USDA has 
also estimated that the paid lunch pricing and non-program food 
revenue provisions of HHFKA sections 205 and 206 will generate $7.5 
billion in revenue for SFAs through FY 2015.\47\ In the aggregate, 
therefore, these provisions provide a net gain in SFA revenue that 
exceeds the estimated cost of serving school meals that follow the 
Dietary Guidelines.
---------------------------------------------------------------------------

    \46\ Federal Register, Vol. 77, No. 17 pp. 4088-4167.
    \47\ USDA estimate contained in the regulatory impact analysis 
for the interim rule, ``National School Lunch Program: School Food 
account Revenue Amendments Related to the Healthy, Hunger-Free Kids 
Act of 2010.'' Federal Register Vol. 76, No. 117, pp. 35301-35318.
---------------------------------------------------------------------------

    The benefits to children who consume school meals that follow 
DGA recommendations is detailed in the impact analysis prepared for 
the final meal patterns rule.\48\ As discussed in that document, the 
2010 Dietary Guidelines Advisory Committee emphasizes the importance 
of a diet consistent with DGA recommendations as a contributing 
factor to overall health and a reduced risk of chronic disease.\49\ 
The new meal patterns are intended not only to improve the quality 
of meals consumed at school, but to encourage healthy eating habits 
generally. Those goals of the meal patterns rule are furthered by 
the funding made available by this final rule.
---------------------------------------------------------------------------

    \48\ Federal Register, Vol. 77, No. 17 pp. 4088-4167.
    \49\ Report of the Dietary Guidelines Advisory Committee on the 
Dietary Guidelines for Americans, 2010, p. B1-2. (http://www.cnpp.usda.gov/DGAs2010-DGACReport.htm).
---------------------------------------------------------------------------

VII. Alternatives

    The substantive differences between the interim and final rules 
are:
    1. Decreasing the amount of information required in the States' 
quarterly certification reports and clarifying that the reports need 
not be submitted once all SFAs are certified for the performance-
based reimbursement; and
    2. making permanent the increased flexibility for SFAs regarding 
weekly maximum grains and meat/meat alternates and the serving of 
frozen fruit with added sugar.
    These changes all decrease the administrative and/or compliance 
burden on States and SFAs and/or increase the flexibility for SFAs 
in serving lunches and breakfasts that comply with the school meal 
patterns, thereby decreasing costs to States and SFAs. The primary 
alternative considered in the course of developing the final rule 
was not to make these changes.
    We do not provide a separate cost estimate for this ``doing 
nothing'' alternative because the decrease in burden associated with 
the shorter quarterly reports for States is small \50\ (less than 
$50,000 per year) and because the additional transfers possibly 
attributable to the increase in flexibility to SFAs are likely 
within the cost estimate range published with the interim rule \51\ 
and updated above.
---------------------------------------------------------------------------

    \50\ Furthermore, we do not estimate any Federal administrative 
savings as a result of the shorter quarterly reports.
    \51\ Federal Register, Vol. 77, No. 82 pp. 25024-25036.
---------------------------------------------------------------------------

VIII. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), we have prepared an accounting statement 
showing the annualized estimates of benefits, costs and transfers 
associated with the provisions of this final rule.
    The figures in the accounting statement are the estimated 
discounted, annualized costs and transfers of the rule. The figures 
are computed from the nominal 5-year estimates developed above and 
summarized in Table 3. The accounting statement contains figures 
computed with 7 percent and 3 percent discount rates for both our 
upper bound (primary) estimate and our alternate estimate.
    Note that we only provide an accounting statement for the final 
rule, not for the interim rule (as the interim rule was the baseline 
for our cost analysis for the final rule). As noted in the above 
analysis, any possible changes in costs or transfers attributed to 
the final rule are small and are likely within the cost estimate 
range published with the interim rule and updated above.
    Illustration of computation:
    The annualized value of this discounted cost stream over FY 
2013-2017 is computed with the following formula, where PV is the 
discounted present value of the cost stream, i is the discount rate 
(e.g., 7 percent), and n is the number of years (5) \52\:
---------------------------------------------------------------------------

    \52\ The Excel formula for this is PMT (rate num; periods, PV, 
0, 1)
[GRAPHIC] [TIFF OMITTED] TR03JA14.000


----------------------------------------------------------------------------------------------------------------
                                                                                   Discount rate      Period
                                                Estimate            Year dollar      (percent)        covered
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Qualitative: Compared with the interim rule, the final rule slightly decreases the reporting burden on States
 and makes permanent the increased flexibility for SFAs regarding weekly maximum grains and meat/meat alternates
 and the serving of frozen fruit with added sugar.
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Annualized Monetized..................  n.a.....................            2013               7     FY2013-2017
($millions/year)......................  n.a.....................            2013               3
----------------------------------------------------------------------------------------------------------------
As discussed in Section V.A., the reduction in administrative costs to State agencies as a result of the reduced
 quarterly reporting requirement on SFA compliance is already in our baseline. The reduction in burden for State
 agencies who will no longer have to submit quarterly reports on SFA compliance once all SFAs have been
 certified is minimal. The final rule may also slightly reduce the costs of complying with the meal patterns for
 some SFAs, and reduce the costs of maintaining compliance by others. This reduction in SFA cost is not
 estimated, and likely lies within our range of alternate estimates for the interim rule.
----------------------------------------------------------------------------------------------------------------

[[Page 340]]

 
                                                    Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized..................  n.a.....................            2013               7     FY2013-2017
(millions/year).......................  n.a.....................            2013               3
----------------------------------------------------------------------------------------------------------------
The changes in the final rule that are designed to facilitate compliance with the new meal patterns are expected
 to increase slightly the number of SFAs that are certified by their State agencies to receive the additional 6
 cents per reimbursable lunch. This increased transfer from the Federal government to SFAs will be realized
 after the end of SY 2013-2014 (primarily in FY 2014 and beyond) when the grains, meat/meat alternate, and
 frozen fruit provisions contained in FNS policy memos would have expired in the absence of the rule. This
 possible, small increase in Federal transfers to SFAs also likely lies within our range of alternate estimates
 for the interim rule.
----------------------------------------------------------------------------------------------------------------

[FR Doc. 2013-31433 Filed 12-31-13; 11:15 am]
BILLING CODE 3410-30-P