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Mr. BELL. Well, then I suppose, Mr. Lyng, you could make an argument that you could dip in to some extent to make up the difference of the still needy children of 500,000. But what would it take, for example ?

Mr. LYNG. We are prepared to spend what it will take under our regulations, Mr. Bell. We have said that we would pay the minimum average figure regardless of how many participate. We operate on an estimated basis. We are estimating it would be $135 million, which, if we did not apply for a supplemental appropriation, would have to come from section 32, so that would take

Mr. BELL. Another $135 million?

Mr. Lyng. We are at this point, based on the only authorization we have, invading that $300 million by $135 million.

Mr. BELL. That is where you get your money for that?
Mr. Lyng. Yes.

Mr. BELL. And if you were to up that, I suppose, to include these other people you would have to get up to another what, $40 million or what?

Mr. Lyng. Yes. If we moved from the 5 cents to the 6 cents.
Mr. QUIE. Would the gentleman yield?
Mr. BELL. Yes.

Mr. QUIE. That pool of money is not something that would be automatically there. Once you draw it down, it is not there as long as we are utilizing all the money that comes into section 32 each year, so it stays down there. The only way this could ever build up again is if you would find the money for the school lunches from other sources and let some of the section 32 funds accrue in a year and fill that $300 million again.

Mr. BELL. As I understand, you could take $40 million from that and you would still have $260 or whatever it would be.

Mr. Lyng. In this year, Mr. Bell, and then next year we would have to find some other.

Mr. Quie. We are talking about 125-
Mr. BELL. You said you had more after that?

Mr. Lyng. No, we are evading the carryover, unless we ask for a supplemental appropriation. That has not been clearly determined at this point.

Mr. Quis. If you got a supplemental appropriation and funded it that way, you would not have to draw down the $300 million. I have no objection to drawing down the $300 million to some lower level, but we must remember with only $125 million left and you put those two sums together, you cannot be doing this indefinitely.

Mr. BELL. There could be an argument made that you have 500,000 children that are really terribly in need. You can make an argument for that.

Mr. Quie. Yes; I would make the argument for that, but I just want everybody to be aware of what they are doing.

Mr. Bell. I am just pointing out that assuming that the mechanics of it could be worked out, the money could be brought to where the needy children are.

Mr. Lyng. That is correct.

Mr. BELL. That you still have the resources to take care of the 500,000 needy children.

Mr. Lyng. That is correct, Mr. Bell. That has not been the whole problem. There are many other problems involved in the nonprogram schools, among them equipment; the ability of the schools to manage the programs. As I say, great strides have been made. As a matter of fact, the figures last year showed that we moved from 4 million to 7.3 million needy children between September and the end of the school year. We have made great progress here.

We don't have that much farther to go. We think that during the next year, particularly during the next 2 years, we are going to substantially eliminate this problem.

Mr. BELL. So what you are saying, in effect, is you have not got the mechanics worked out or it cannot be worked out.

Mr. Lyng. Yes. It is not 100 percent money. Money is not the total problem. Some nonprogram schools are private or parochial schools that have some problems—although we have private and parochial schools in the program. There are some small country schools where the children go home or bring bagged lunches and they are quite happy.

Mr. BELL. I am not talking about robbing Peter to pay Paul, but you have the question of priority.

Mr. Lyng. I would agree.
Mr. PUCINSKI (presiding). Mr. Meeds.
Mr. MEEDS. Thank you.

Mr. Lyng, let me say I am happy to get this chance to discuss with you this very pressing problem.

My understanding is that when the guidelines were first announced, that you set a family income of some $3,720, I believe, for a family of four, but you also allowed States in certain instances to exceed that, if they wanted a higher State average income for a family of four, that they were allowed to do so under those original guidelines. Is that correct

Mr. Lyng. Yes.
Mr. MEEDS. Indeed 21 States did do that?

Mr. Lyxg. I am not sure of the number. There were a number of States that did that; that is correct.

Mr. Meeds. Then when you changed your guidelines, you raised that amount to a family of four to $3,940, I believe it was?

Mr. Lyng. That is correct.

Mr. MEEDs. But you did not allow States to set anything above that; is that correct?

Mr. Lyng. That is the provision that will be in the regulations that we announced today.

Mr. MEEDS. Well, how much of the $130 million that you are saying you are going to put into it comes from the fact that there will be no 21 States going above $3,720 ?

Mr. Lyng. There is no precise way to figure that, Mr. Meeds. You see, because we have increased the poverty figure, there is really no comparability with last year. We estimate, though I think I pointed out earlier that one of our problems on this is that if we don't have some sort of a limit on eligibility when we increase the amount of our payment to as high as it is. We will have 40 plus 5, 45—plus 7, possibly 8 in commodities. We are getting very close to paying the total cost of the luncheon.

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Mr. MEEDS. I am not saying I disagree.

Mr. Lyxg. So what we run into is a situation where in one major city in the country they set a level of minimum poverty level for a family of four at $7,500. By getting our payment up high, you get a disincentive for local government to resist having a very high level of eligibility.

So we feel that it is quite essential that we have not only a minimum—which we know is essential; the law calls for that—but also is essence a maximum.

Mr. MEEDS. Yes. I am not saying I disagree with your setting this guideline. I am just saying that $130 million that you are talking about having to put in extra for this program, there may be a part of that which you would have anyhow be putting in because there were 21 States that were going above your $3,720 minimum anyhow.

Mr. Lyng. Yes, or to put it another way, if we had not done that, it could cost us more than the $135 million.

Mr. MEEDS. If you allowed them to go over?
Mr. Lyng. Yes.
Mr. MEEDS. I agree with that.
Mr. Lyng. Yes.

Mr. MEEDS. But that $135 million is not under those circumstances as big as it might look.

Now you talked about guidelines which would allow under especially needy circumstances where they could go to 60 cents; is that correct?

Mr. Lyxg. Yes.
Mr. MEEDS. Is that still in the new regulation you promulgated ?
Mr. Lyxg. Yes.
Mr. MEEDS. Could you tell us a little bit about those circumstances ?

Mr. Lyng. I will ask Miss Kelley. Could you spell out the circumstances?

Miss KELLEY. There would be three general criteria. One, the school's school lunch operating cost or the percentage of free and reduced price meals it was serving, was higher than was typical for the State. Either they had above-average cost or had above-average percentage of free and reduced price meals.

Mr. MEEDS. Over the last year or over the State average ?
Miss KELLEY. No, over the State average, currently.
Mr. MEEDS. All right.

Miss KELLEY. Second, the projected cost of operating the programserving those free and reduced price meals and the revenues that would be engendered, at a 30-cent rate of section 11 assistance, would result in an operating deficit in the school, that is, you took all of the State, local, and Federal money at the 30-cent rate, the school still needed more money to finance the free and reduced price lunches.

The third criteria would be a finding on the part of the State that this operating deficit did not result from poor management practices; that it was not inefficiently operated; that high costs could be corrected by prudent and effective management.

Those the the three general criteria.

Mr. MEEDS. If I may just ask a follow-on question, who makes the determination as to whether or not a State meets that criteria, the Secretary?

Mr. Lyxg. The State department of education, the chief State educational officer and his staff under the guidelines that she has outlined.

Mr. MEEDS. I yield to the gentleman.

Mr. Quie. You said in your first criteria two things would be taken into consideration, the cost or the percentage of students. What causes costs to be higher than average that would be acceptable ?

You said that poor management would not be the case.

Miss KELLEY. Typically, in an urban situation labor costs will be considerably higher than in the rural areas, particularly if the workers are unionized. You may find it is a central core school, where they do not have facilities, they must use a more expensive method to prepare food, on the outside and then truck it to the school, and so forth.

Mr. MEEDS. Now I am advised by the Seattle School District, and I am not exactly certain of these figures, but on the projection of the 30cent reimbursement the Seattle School District would already be $10,000 in arrears in their program. Does that sound reasonable?

Mr. Lyng. I would think that would be a rather modest amount for the Seattle School District.

Mr. Olsson. The State of Washington benefited from the rates and the proposed regulations. If the system which was in effect last year had continued, the State of Washington would have been worse off than it would have been under the 30-cent rates and it would be better off

Mr. Lyng. Yes; I think the State of Washington will be far better off than they have ever been before under the regulations as we put them out today.

Mr. MEEDS. I assume so since it will be at least 10 cents more on an average.

Mr. Lyng. Yes; I think that will substantially solve the problems in that State.

Mr. MEEDS. Why is this so? Why should they be proportionately better off?

Mr. Lyng. Well, Mr. Meeds, we apportioned the funds in a totally different way last year. Under the National School Lunch Act—this is a very complex program, far too complex, we think-we propose to do something about that.

But under the program section 4 and section 11 are allocated based on formulas in the law. Last year we augmented both section 4 and section 11 with some section :32 funds. We allocated the section 32 funds on the section 11 formula. The formula took into consideration, and I don't know the precise language, but it took into consideration such things as per-capita income, level of the program, the poverty population based upon the 1960 census because we didn't have the 1970 census at this point in time.

So the State of Washington suffered as did the State of California and some other States where they previously had not had a high level of participation, but did have, historically, a fairly high or comparatively high income, per-capita income.

Mř. MEEDS. Which is fast disappearing.
Mr. Lyng. Yes, some real problems

Mr. MEEDS. We have been through the problems that the Puget Sound area has, and just to give you some idea—and if there is no objection, I will insert this entire letter in the record after the Secretary's statement, but I want to just give you some idea of what is happening in my area. (The letter follows:)

MUKILTEO SCHOOL DISTRICT No. 6,

Mukilteo, Wash., October 4, 1971.
Re Senate Joint Resolution 157-Free/reduced lunch reimbursement rate in-

crease.
Hon. LLOYD MEEDS,
House of Representatives,
Washington, D.C.

DEAR REPRESENTATIVE MEEDS : In listening to the news, reading newspapers and talking with other supervisors of food services (School Lunch Program Directors) in the State, it is my understanding that the Senate unanimously passed S.J.R. 157-Increase for Free and Reduced Lunch Reimbursement to $.45 ($.40+.05= $.45). The reimbursement rate is presently $.35 ($.30+.05=$.35).

The Resolution is scheduled to go to a Committee, of which you are a member, and I wanted to take this opportunity to exress my sincere hope that you will do everything in your power to help this Resolution through the Committee and to the House for passage.

The free and reduced lunches offered in the Mukilteo School District have increased as follows:

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The month of September 1971 shows a large increase of free and reduced lunches over September 1970.

Our school lunch program is set up based on a “break even” basis, as are most school lunch programs in other districts throughout the State, although most districts do not break even.

In order to help offset the local cost of the increasing number of free and reduced lunches served and to continue to feed all the children that cannot afford to pay for their lunches, there is a great and justifiable need for the increased reimbursement rate presented in S.J.R. 157 to become law. Respectfully submitted.

TED C. E. Kyutson, Food Services Supervisor.

Mr. MEEDS. Mukilteo, and it sounds like a disease, but it is the name of a city—it is a realtively affluent suburb area between Seattle and Everett. In 1969 Mukilteo served no free or reduced price lunches. They served some reduced price lunches, but no free lunches.

In 1969-70 they served 5,968 reduced price lunches and 3,525 free lunches. In 1970-71 they served 19,905 reduced price lunches and 42,291 free lunches. The income of these people in this area has gone down in addition to, I think, the increased benefits under the act which came under our 1969–70 amendments, which had a tremendous effect in this area and unless these school districts are compensated or reimbursed at a relatively high rate, they are just going to have absolute disaster.

So I am very happy to see the changed position of the Department and would hope that strong consideration would be given to raising the 5 cents to 6 cents and that the Department could. I think there is no question they could use these section 32 funds. We have been through that with some other matters, too, and what it amounts to is that I know you don't want to dip into that fund any more than is necessary,

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