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January, 2003

The Recent Debate Over
School Lunch "Overcertification":
Unclear Data And Ill-Considered Proposals Are A Threat To Eligible Low-Income Children

Recent articles in the press have suggested that as many as one in five children who are certified as eligible for free school lunch may in fact be ineligible because the family's income may be too high. This U.S. Department of Agriculture (USDA) overcertification estimate is being cited in some quarters to justify sweeping income verification proposals for children in the free and reduced-price school lunch program. But there are good reasons to believe that the estimate is unreliable, and that the cures being proposed will deny school lunch to hundreds of thousands - perhaps more than a million - eligible low-income children.

The extent of "overcertification" in the School Lunch Program is unclear. USDA's methodology is unreliable and its estimates appear to overstate the problem significantly. Schools are required to verify the income of a small percentage of school lunch applicant families every year, but they do not have to report the results to USDA. USDA's estimates therefore are not based on the actual studies, but a dubious extrapolation of national Census data. Looking at the USDA methodology suggests it is not certain that a significant overcertification problem exists at all.

• USDA's estimate of overcertification virtually disappears when it counts reduced-price as well as free lunches. When the number of children certified for both free and reduced-price school lunch combined is compared with the corresponding Census data, the difference is only two percent.
  
  
• USDA's estimate compares apples and oranges. USDA compares one data set (from the Census) that uses annual income to estimate the number of potentially eligible children with another based on monthly income (actual free school lunch certifications). But many low-income families experience income fluctuations from month to month - in one study of school lunch 15 percent of the children correctly certified in the fall had family income increases above the income limit by the following spring. A National Research Council report on measuring poverty points out that, in counting the number of people eligible in a means-tested program, "the shorter the accounting period, the higher the poverty rate." USDA's estimate also relies on comparing Census data from one calendar year (1999) with free school lunch certification numbers from an earlier year (1998) during a period of rising income. Thus, some families eligible for free school lunch at the beginning of the school year would have had income above the eligibility limit by the end. When Census and free school lunch certification data from the same calendar year are compared, up to one quarter of the overcertification estimate disappears.
  

Some income verification proposals would do far more harm than good. Some reports have indicated that the Bush administration may propose that all 16 million children will have to prove how little their families earn before being allowed to eat free or reduced-price school lunches. Such sweeping income documentation requirements would likely cause far more eligible than ineligible children to lose the benefits of school lunch and school breakfast.

• Income verification demonstration projects carried out by USDA found that, when income documentation is required, far more eligible low-income children are diverted from free or reduced-price lunch than ineligible children are deterred. Lost paperwork, language problems and all the other complications of broad income verification make such an effort a very imprecise tool in school lunch. Two national school lunch studies found that over three-fourths of the families that did not respond to requests for income documentation were still eligible. Applying such a process to every child would push hundreds of thousands - perhaps more than a million - eligible children out of the program. As 25 House of Representatives members recently wrote to OMB, such "unintended consequences for low-income children who are eligible [violate the principle that the] cure should not be worse than the disease." In the words of a Sacramento Bee columnist, "Now we're ignoring corporations adopting Bermuda addresses to avoid paying taxes and preparing to grill kids standing in cafeteria lines instead…. What are we doing?"
  
  
• Reducing the counts of eligible children in schools could also have adverse effects on educational funding for schools with the greatest need. Federal and state educational programs that target low-income children and schools, such as Title I, often base their funding allocations on free or reduced-price lunch certifications. With broad income documentation possibly deterring large numbers of eligible children, low-income schools and children could also lose significant portions of the educational funds that they need.

Other, better strategies are available. USDA has been working for several years to discover the extent of and possible targeted methods to rectify any overcertification:

• Proposed rule. USDA proposed a rule in Summer 2002 that will require school districts and states to report the results of their application audits. These results would allow USDA to more accurately determine the extent of any overcertification.
  
  
• Pilot projects. In 2000, USDA started three-year pilot projects to evaluate different methods of determining income eligibility, including income documentation (albeit in a non-representative sample of schools). From the final results, expected in 2004, USDA should be able to discover some of the impact of such methods. However, more rigorous pilot studies in a nationally representative sample of schools would be necessary to accurately determine the effects of such methods.

Looking at audit information and carefully designed pilot projects would be a prudent course - figuring out the scope of any problem and finding out what works - before altering a successful program that serves 16 million low-income school children across the nation. New, sweeping proposals advanced just to respond to a bad estimate of a problem, or to save money, or to rush to fit the 2003 reauthorization timetable run too great a risk of fundamentally damaging the program.