Welfare Reform: Effects of Changes Made to the Summer Food Service
Program (Testimony, 03/10/98, GAO/T-RCED-98-120).

Pursuant to a congressional request, GAO reported on the changes made to
the Department of Agriculture's (USDA) Summer Food Service Program,
focusing on the: (1) effects these changes had on the number of sponsors
and children participating in the program in 1997; and (2) potential
effect of the reduced subsidies for the future.

GAO noted that: (1) the reduction in federal subsidies for sponsors did
not have a significant effect on the number of program sponsors or
children participating in 1997; (2) state officials specifically
identified only a handful of 1996 sponsors that stopped participating in
the program in 1997 because of the reduced subsidies, and the number of
children participating in the program was generally not affected; (3)
however, almost half of the states reported that the program was
affected in other ways, such as sponsors' reducing the number of food
items in the meals provided or reducing the number of locations where
meals were served; (4) while the number of sponsors and children
participating changed only minimally in 1997, both the USDA and the
majority of the states expect to see a decrease in the number of
sponsors and in the number of children participating over the future
because of the reduced subsidies; (5) USDA and several state officials
said that some sponsors continued their participation in 1997 to test
whether they could finally manage the program with the reduced rate; (6)
USDA officials expect that sponsors that could not manage the program
with the reduced rates will leave it in future years; and (7) on the
other hand, USDA and some state officials said that other factors such
as increased outreach efforts and state funding could mitigate the
effects of the rate decrease on the number of sponsors and children
participating in the future.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-98-120
     TITLE:  Welfare Reform: Effects of Changes Made to the Summer Food 
             Service Program
      DATE:  03/10/98
   SUBJECT:  Children
             Food programs for children
             State-administered programs
             Intergovernmental fiscal relations
             Federal grants
             Welfare benefits
             Federal/state relations
             Program evaluation
             Subsidies
IDENTIFIER:  Summer Food Service Program for Children
             
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Cover
================================================================ COVER


Before the Subcommittee on Early Childhood, Youth and Families,
Committee on Education and the Workforce, House of Representatives

For Release
on Delivery
Expected at
10:30 a.m.  EST
Tuesday
March 10, 1998

WELFARE REFORM - EFFECTS OF
CHANGES MADE TO THE SUMMER FOOD
SERVICE PROGRAM

Statement of Robert A.  Robinson, Director
Food and Agriculture Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-120

GAO/RCED-98-120T


(150277)


Abbreviations
=============================================================== ABBREV

  USDA -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to appear before you today to discuss our ongoing work
for the Committee on the effects of changes made to the U.S. 
Department of Agriculture's (USDA) Summer Food Service Program. 
These changes were mandated by the 1996 Personal Responsibility and
Work Opportunity Reconciliation Act--commonly called the Welfare
Reform Act.  The Summer Food Service Program, through approximately
3,500 sponsors in local communities, provided free meals to over 2
million children when school was not in session in 1997.  The program
cost the federal government about $258 million.  The Welfare Reform
Act made three major changes to this program:  it reduced the federal
subsidies that sponsors receive for meals served, eliminated the
federal subsidy for a fourth daily meal provided in summer camps and
programs that primarily service migrant children, and eliminated the
grants available to assist sponsors in expanding the program.  The
reduction in federal subsidies became effective January 1997. 

Our testimony today focuses on the effects these changes had on the
number of sponsors and children participating in the program in 1997
and the potential effect of the reduced subsidies for the future. 
Our testimony is based on the interviews we conducted with Summer
Food Service Program officials in all 50 states and the District of
Columbia as well as some preliminary analyses of the data they
provided.  Our interviews with state officials were conducted by
telephone using a questionnaire.  During our conversations, we
requested that state officials send us detailed information on each
of the 1996 and 1997 sponsors of the summer food program. 

In summary, the reduction in federal subsidies for sponsors did not
have a significant effect on the number of program sponsors or
children participating in 1997.  State officials specifically
identified only a handful of 1996 sponsors that stopped participating
in the program in 1997 because of the reduced subsidies, and the
number of children participating in the program was generally not
affected.  However, almost half of the states reported that the
program was affected in other ways, such as sponsors' reducing the
number of food items in the meals provided or reducing the number of
locations where meals were served.  While the number of sponsors and
children participating changed only minimally in 1997, both the
Department and the majority of the states expect to see a decrease in
the number of sponsors and in the number of children participating in
the future because of the reduced subsidies.  Department and several
state officials said that some sponsors continued their participation
in 1997 to test whether they could financially manage the program
with the reduced rates.  Department officials expect that sponsors
that could not manage the program with the reduced rates will leave
it in future years.  On the other hand, Department and some state
officials said that other factors such as increased outreach efforts
and state funding could mitigate the effects of the rate decrease on
the number of sponsors and children participating in the future. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

The Summer Food Service Program is a federal entitlement program that
provides funds for program sponsors to serve free, nutritious meals
to low-income children when school is not in session.  It is
administered by USDA's Food and Nutrition Service, which provides
money to state agencies to operate the program and to reimburse local
eligible sponsors for meals served to children at designated
locations.\1 Eligible sponsoring organizations include (1) public or
private nonprofit schools; (2) units of local, municipal, county, or
state governments, such as county or city recreation programs; and
(3) private nonprofit groups, such as Boys and Girls Clubs or
churches.  In fiscal year 1997, sponsors served over 126 million
meals at a total federal cost of about $258 million. 

Local program sponsors serve free meals to all children 18 or younger
at approved sites located in low-income areas.\2 Low-income areas are
those in which at least 50 percent of the children are from
households with income at or below the eligibility level for free and
reduced-price school meals--185 percent of the federal poverty
guidelines ($29,693 for a family of four in the summer of 1997).\3
Sponsors may also operate sites in areas not designated as low income
if 50 percent or more of the children enrolled in such sites are
eligible for free or reduced-price school meals.  While summer camps
may participate regardless of their location, only meals served to
enrolled campers who have been individually determined to be eligible
for free or reduced-price school meals are eligible for federal
subsidies. 

The meals and snacks sponsors provide must meet the program's
nutritional requirements.  Sponsors can receive federal subsidies for
only two meals per child per day--breakfast and lunch or lunch and a
snack.  However, camps and programs primarily serving migrant
children can receive subsidies for up to three meals each day for
each child.  This three-meal allowance is a change in the program
made by the Welfare Reform Act.  Previously, these sponsors could
receive payments for up to four meals per day. 

Sponsors receive subsidy payments in two different categories for
their costs of preparing and serving free meals.  One category covers
sponsors' administrative costs incurred in the management of summer
food programs, such as office expenses, support staff salaries,
insurance, and some financial management costs.  The second category
covers sponsors' operating costs incurred in the preparation and
distribution of the food, the provision of transportation in rural
areas, and program activities and salary for the staff supervising
the children.  Sponsors must maintain records to document all costs
and the number of meals they claim for reimbursement for both
categories.  Sponsors are reimbursed on a per-meal basis at the
established rate or for their actual costs, whichever is less.  These
reimbursement rates in each category are set by law and adjusted each
year to reflect changes in the Consumer Price Index. 

The Welfare Reform Act reduced the operating subsidies for meals and
snacks served under the summer food program, effective for the 1997
summer.  It did not reduce subsidies for administrative costs.  Table
1 highlights the changes in the reimbursement rate for meals since
1996.  While the 1998 rates reflect an increase to account for
inflation, they are still lower than the rates established for 1996. 



                                Table 1
                
                        Meal Reimbursement Rates

                                          1997 rate
                                    ----------------------
                                      Prior to
                                       welfare
Meal                     1996 rate   reform \a    Actual\b   1998 rate
----------------------  ----------  ----------  ----------  ----------
Breakfast                  $1.2075       $1.24       $1.16       $1.19
Lunch/supper                2.1675        2.23        2.02        2.08
Snack                         0.57        0.58        0.47        0.48
----------------------------------------------------------------------
\a This is the rate that would have been in effect if the Welfare
Reform Act had not been enacted. 

\b The Welfare Reform Act set the rates at $1.13 for breakfast, $1.97
for lunch/supper, and $0.46 for snacks.  However, these rates were
indexed for inflation in January 1997; thus the 1997 rates were
slightly higher than the rates established in the law. 

The 1996 act also eliminated grants to the states for initiating or
expanding the school breakfast and summer food programs.  These
grants, known as start-up and expansion grants, had been mandated by
the Child Nutrition Act for the school breakfast program since 1989
and the summer food program since 1994.\4 Previously, USDA had been
required to provide grant funding totaling $5 million a year through
fiscal year 1997, $6 million in 1998, and $7 million a year
thereafter for grants in both programs.  These grants covered
sponsors' one-time costs associated with starting or expanding the
programs. 


--------------------
\1 In 1997, USDA operated in the place of state agencies in four
states--Georgia, Michigan, New York, and Virginia.  Throughout this
testimony, the term "state officials" includes the USDA officials who
manage the program in these four states. 

\2 People over 18 who have a disability and who participate in a
program established for the mentally or physically handicapped may
also receive meals. 

\3 Numbers are slightly higher in Alaska and Hawaii. 

\4 Grants were authorized under section 4(g) of the Child Nutrition
Act, as amended by section 201(d) of the Healthy Meals for Healthy
Americans Act of 1994, P.L.  103-448 (1994). 


   REDUCED RATES HAD LITTLE EFFECT
   NATIONWIDE IN 1997, BUT SOME
   FUTURE EFFECTS ARE EXPECTED
---------------------------------------------------------- Chapter 0:2

The reduced reimbursement rates had little effect on the number of
sponsors or children participating in 1997.  Less than 1 percent of
the sponsors were identified by state officials as having left the
program because of the reduced rates.  On the basis of the
information these officials provided, we determined that a relatively
small number of children lost access.  However, the lower rates did
cause some sponsors to make program changes, such as modifying the
content of the meal or closing meal sites.  Both USDA and many state
officials expect the lowered reimbursement rates to somewhat reduce
the number of sponsors and children participating in the program over
the next 3 years. 


      FEW SPONSORS LEFT THE
      PROGRAM BECAUSE OF THE
      REDUCED RATES
-------------------------------------------------------- Chapter 0:2.1

According to our analysis of data from the 50 states and the District
of Columbia, 346 of the 3,387 sponsors that participated in the
program in 1996 did not do so in 1997.  For these 346 sponsors, state
officials were able to identify the reasons that 244 sponsors left
the program.  According to these officials, 22 left because of the
reduced federal subsidies.  These 22 sponsors represent less than 1
percent of the sponsors that participated in the program in 1996. 
Another 222 sponsors left for a variety of other reasons, such as the
loss of personnel or construction work at the location where the
program operated.  The states did not know the reasons for leaving
for the remaining 102 sponsors. 

The 22 sponsors specifically identified as having left the program as
a result of the lower reimbursement rates operated meal services at
90 locations.  According to the information provided by state
officials, 37 of the locations operated by these sponsors were taken
over by other sponsors in 1997.  These 22 sponsors had an average
daily attendance of about 5,000 children in July 1996.  Using the
information provided by state officials, we estimate that about 49
percent of the children served by these 22 sponsors were served by
other sponsors in 1997, about 30 percent were not served by other
sponsors, and the effect on the other 21 percent is unknown. 

Despite the reduced rates, more sponsors may have participated in the
program in 1997 than in 1996.  On the basis of preliminary USDA data
and information we obtained from state officials, we determined that
approximately 524 new sponsors may have joined the program in 1997. 
This addition would represent a net increase of approximately 178
sponsors, or a 5-percent increase over the previous year.  By
comparison, between 1994 and 1996, there was virtually no change in
the total number of sponsors.  However, from 1990 to 1994, the number
of sponsors increased each year by between 8 and 10 percent. 


      MOST STATES REPORT LITTLE OR
      NO DECREASE IN PARTICIPATION
      AS A RESULT OF THE RATE
      REDUCTION
-------------------------------------------------------- Chapter 0:2.2

Officials from 38 states and the District of Columbia reported that
the decrease in the reimbursement rates did not affect the number of
children participating in their state in 1997.  In fact, some state
officials reported that participation had increased in 1997 despite
the reduced federal reimbursement rates.  Four states--Minnesota, New
York, Vermont, and Washington--reported receiving state funds to
offset the effect of the reduced rates.  Other states said that their
successful outreach efforts to bring in new sponsors offset the
effect of the rate reduction on participation. 

Officials in 11 states reported that children's participation in
their state decreased somewhat as a result of the change in the
reimbursement rates.  Officials from some of these states explained
that participation decreased because they could not replace the
sponsors that left.  In addition, some state officials said that
sponsors that stayed in the program reduced the number of locations
where they served meals.  As a result, some children who received
free meals in 1996 no longer had access to these benefits in 1997. 
One state official mentioned that cost-cutting measures, such as
serving more cold meals and decreasing recreational activities, made
the program less attractive to some children.  Finally, another state
official said that participation was lower because the reduction in
the reimbursement rates discouraged a few potential sponsors from
joining the program.  In the two remaining states, officials were not
certain whether the reduced rates had any effect on participation. 


      ALMOST HALF OF THE STATES
      REPORT THAT REDUCED RATES
      FOR MEAL REIMBURSEMENTS
      CAUSED PROGRAM CHANGES
-------------------------------------------------------- Chapter 0:2.3

States officials were divided in their assessment of whether the rate
reductions affected the program in ways other than sponsor changes or
child participation levels.  Officials in 23 states and the District
of Columbia told us that there were no other changes to their program
as a result of the reimbursement rate decrease, including the quality
of the meals served. 

However, officials in 24 states reported effects other than changes
in sponsors and participation that resulted from the loss of federal
funds.  The following were the most frequently mentioned effects: 

  -- Meal changes were made.  For example, the Georgia director said
     that sponsors served less fresh fruit and did not offer
     additional foods such as desserts and chips as often as in the
     past.  The Maine director reported that sponsors in his state
     had to select their food more cautiously, favoring less costly
     items.  Wisconsin officials said sponsors provided more
     pre-packaged juice packs in place of fruits and vegetables to
     decrease labor and food costs.  In Hawaii, where the Department
     of Education actually prepares the food for sponsors to
     distribute, an official said while the department did not change
     the entree or fruit/vegetable servings, a smaller bread and
     dessert portion was served to save money. 

  -- The number of meal sites was reduced.  According to Pennsylvania
     officials, sponsors had to close or consolidate sites that were
     too expensive to operate.  Small sites that served only 15 to 20
     children could not afford to provide meals at the reduced rates. 
     California officials also reported that some sponsors closed
     sites they could no longer afford to operate.  For example, one
     school sponsor closed three of its six sites because it could
     not afford the labor costs. 

  -- Some sponsors had financial difficulty.  The Ohio director said
     more sponsors incurred costs that exceeded the federal
     reimbursement in 1997 and that it was hard for sponsors to
     "break even." Both Pennsylvania and Tennessee officials reported
     that rural sites are having the most difficulty managing their
     programs with the reduced rates.  Sponsors facing such financial
     difficulty that do not lower the costs associated with meal
     preparation would need to either seek additional sources of
     funds for the shortfall or cut expenditures for other aspects of
     their program, such as recreation. 

In the remaining four states, officials were not certain whether the
reduced rates had any other effects. 


      MANY STATES EXPECT SOME
      FUTURE DECREASES IN THE
      NUMBER OF SPONSORS AND
      CHILDREN
-------------------------------------------------------- Chapter 0:2.4

According to USDA officials, the full effect of the reduced subsidies
was not experienced in the summer of 1997.  The officials said that
they believed some sponsors chose to continue participating in the
program in 1997 to test their ability to manage the program
financially with the reduced rates.  According to USDA officials,
sponsors' experiences in 1997 will determine whether they remain in
the program.  They suggested that the number of sponsors leaving the
program in 1998 would be greater than in 1997. 

In responding to our question of whether they would see additional
changes in the number of sponsors over the next 3 years because of
the rate decrease, the states reported the following: 

  -- 24 states and the District of Columbia said that the number of
     sponsors would decrease somewhat;

  -- 16 states reported that the lower meal rates would not affect
     the number of sponsors; and

  -- 10 states reported that they were uncertain of the effect. 

State officials predicted similar effects on the number of children
participating in the program over the next 3 years.  Officials in 22
states reported that participation will decrease somewhat.  Most of
these officials explained that if they lost sponsors because of the
rate decrease, the number of children the state served would
decrease.  Officials in 16 states and the District of Columbia
reported that the decrease in reimbursement rates would not affect
the number of participants in their program.  Officials in 14 states
said that they were uncertain of the effect. 

State officials explained that a number of factors may mitigate the
effects of the rate decrease on the number of sponsors and children
over the next 3 years.  In particular, officials from several states
said that they are expanding outreach efforts to enroll more sponsors
and/or encourage current sponsors to expand their efforts and may
depend on funds from their states to offset the loss of the federal
funds.  Some state officials also said that the number of children
seeking participation in the program may increase as a result of (1)
welfare-to-work initiatives that could cause parents to rely more on
the care provided through the sponsors and (2) a reduction in
benefits such as food stamps that would make the summer food program
more important.  In addition, USDA officials said that they are
encouraging states to increase their outreach efforts and will take
steps to reduce administrative burden on sponsors in order to
mitigate the effect of the reduced rates. 

As part of the work we have ongoing, we will be examining the level
of sponsor participation in the summer of 1998. 


   OTHER CHANGES HAVE HAD LIMITED
   EFFECT
---------------------------------------------------------- Chapter 0:3

Two other changes to the Summer Food Service Program mandated by the
Welfare Reform Act have had some limited effects on the program. 
First, the decrease in the number of meals--from four to three--for
which summer camps and migrant sponsors could be reimbursed resulted
in the loss of a reimbursement for a snack, not a meal.  According to
many state officials, camps and sponsors serving migrant children
that had previously submitted four meals for reimbursement did not
submit the snack for reimbursement in 1997 because it has the lowest
reimbursement rate.  Our analysis of preliminary USDA data supports
this conclusion.  In July 1997, the number of camp snacks subsidized
by the summer food program was 59 percent lower than in July 1996. 
Other state officials told us that the elimination of the fourth meal
did not have much effect on some camps in their state because these
camps did not serve four meals. 

Second, the loss of start-up and expansion grants may not have had a
significant effect because they were not widely used.  During the 2
years that the grants were available, sponsors in only 22 states
received grants.  In each fiscal year, 1995 and 1996, USDA made $1.5
million of these grants available, but only 44 percent of these funds
were awarded in the 2-year period. 

Many state officials told us that these grants were not very useful
to them in expanding the program.  Officials in states that received
the grants and officials in states that did not complained that the
grant process involved extensive paperwork, which imposed too big a
burden on sponsors for the small amount of funding provided.  In
addition, other state officials said that the grant criteria and
instructions were confusing and the time allowed for them to inform
sponsors about the availability of the grants and completing the
paperwork was too short. 


-------------------------------------------------------- Chapter 0:3.1

This concludes my prepared statement.  Mr.  Chairman, I would be
pleased to respond to any questions that you or other Members of the
Subcommittee may have. 


*** End of document. ***