Federal food assistance programs adjust for food price inflation once per year

Recent food price increases have been dramatic, and many people are discussing the causes.

One source of particular concern has been food assistance programs, such as food stamps and school lunch. Fortunately, federal food assistance programs are indexed for inflation, with updates to program benefits once per year. Program benefits may lag behind recent rapid price increases by 3-5% for a period, and then they are corrected at the next annual update.

A CNN story this week made it sound, unless you read closely, as if food stamp participants have been absorbing the brunt of the food price increases:

But for those on food stamps, higher prices for milk, eggs, bread and other staples often mean tough choices and empty bellies. Many are forced to forgo fresh vegetables and meat, while loading up on pasta and potatoes. Others are turning to churches, food banks and other charities, which are already strained by the increased demand....

"It's been very tough for families," said Stacy Dean, director of food assistance policy for the Center for Budget and Policy Priorities, a liberal-leaning think tank. "They don't have the flexibility in their budgets so they just don't buy as much food or they buy cheap food or they skip meals altogether. Congress can and should act to help people survive the spike in prices."

The fifteenth paragraph explained the impact of price increases on food stamp benefits quantitatively.

The maximum food stamp benefit no longer covers the cost of the "thrifty food plan," the menu of food items the government uses to calculate its allotment. In March, it cost $567.20 to buy the items in the plan for a family of four, compared to $542.10 last June, when the inflation adjustment was set.

Food stamp participants are suffering from reduced real inflation-adjusted benefits at present. The real spending power of the food stamp benefit is currently just under 5% [percentage corrected from 3.5%] below what it was at the last annual update, which can be a substantial hardship for families on a tight budget. Barring Congressional action, this shortfall will continue to grow until the next annual update. Some people consider the benefits inadequate even at the time they are updated, but that is a different issue from food price inflation.

In a related story, Alexandra Lewin at Corporations and Health Watch has a nice article recently describing the hardship facing school meals programs, such as the National School Lunch Program.

Both the National School Lunch Program (NSLP) and competitive foods, those foods sold a la carte outside the NSLP, are affected by rising food and gas prices. As documented by the Economic Research Service, in 2007 milk prices increased by 17%, cheese by 15%, bread by 12% and rice and pasta by 13%.

Kids in poorer communities will suffer most - these already cash-strapped schools are looking for ways to cut costs, undermining many efforts districts have made to implement the mandated, but unfunded, school wellness policies.

The reimbursements for federal child nutrition programs are updated once each year using the federal government's price index for restaurant and cafeteria food. The real value of the reimbursement may currently be running 3-5% below what it was at the last annual update.

In the 2004 reauthorization for child nutrition programs, the federal government required local school districts to establish wellness policies. During the preceding several years, the nutrition environment in schools had been deteriorating, with the growing sales of sugary sodas and high-fat, high-sugar products in schools, but it was difficult to find any one person or committee that had actually chosen these changes. The important bad decisions had been made made piece-meal. The "mandated, but unfunded" school wellness policies mentioned by Lewin were written by the districts themselves in answer to the mandate in the reauthorization bill. Except in trivial ways, the government did not actually require particular policy changes.

USDA's Food and Nutrition Service recently completed a major report on the question of whether reimbursement rates cover the costs of producing school lunches and breakfasts.