The National School Lunch Program was established in 1946 and the School Breakfast Program was established in 1975 to provide nutritionally balanced, low-cost or free lunches and breakfasts to children in participating schools. At the federal level, the programs are administered by USDA’s FNS. At the state level, the National School Lunch Program and School Breakfast Program are typically administered by state educational agencies, which operate the programs through agreements with school food authorities, which are the governing bodies that have the legal authority to operate the school meal programs in one or more schools. School food authorities provide the meals and claim reimbursements based on counts of meals served. Local educational agencies are responsible for providing applications, certifying eligibility, and verifying eligibility of a sample of children certified as eligible for free or reduced-price meals. In fiscal year 2013, approximately 70 percent of school lunches and 85 percent of school breakfasts served went to children who qualified for federally-subsidized free or reduced-price meals. School districts determine whether children are eligible to receive free or reduced-price school meals based on the HHS federal poverty guidelines, which set the maximum eligible income by household size. The HHS poverty guidelines are a simplified version of the Census Bureau’s federal poverty thresholds.income is less than or equal to 130 percent of the federal poverty guideline. A child may also qualify for free meals as categorically eligible if the child is homeless, a runaway, foster child, or a migrant as defined in law, or if a child is from a household that participates in certain other government assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP) or Temporary Assistance for Needy Families (TANF). Children may be certified as categorically eligible if their application indicates they meet such conditions or have someone in the household that participates in one of these programs. Children may also be directly certified as categorically eligible without the need for an application, such as through administrative records matching with other government programs. Children are eligible for reduced-price meals if their household income is greater than 130 percent but less than or equal to 185 percent of the federal poverty guidelines. The HHS 2013 federal poverty guideline for a three-person household, for example, was $19,530; so for the 2013-2014 school year, a child from a three-person household would qualify for free meals if the household income was at or below $25,389. That same child would qualify for reduced price meals if the household income was between $25,390 and $36,131. Income eligibility limits for free and reduced meals are higher in Alaska and Hawaii because HHS’s poverty guidelines, upon which USDA bases its income eligibility guidelines, are higher in those states. School districts receive cash reimbursements from USDA through the state agency with the amount of the per-meal reimbursement based on the type of meal served (lunch or breakfast) and the meal category (free, reduced-price, or paid). (See table 1.) The reimbursement schedule is the same for all states, except Alaska and Hawaii, which receive higher reimbursement rates. An additional per-lunch reimbursement rate of $0.02 is required to be provided if 60 percent or more of a school’s lunches are free or reduced- price. In addition, if the school district has been certified as complying with federal nutritional requirements, there is a $0.06 reimbursement USDA provides additional per-breakfast supplement per lunch served.reimbursements if a school is determined to be in severe need, which is defined as a school that served 40 percent of school lunches free or at a reduced price in the second preceding year. USDA also provides federal support for school meal programs through USDA food commodities. Such commodities provided the equivalent of an additional $0.2325 per lunch served nationwide in school year 2013-2014. According to USDA, the federal subsidy for a free meal is intended to cover, across all school districts, the average school’s cost of producing a reimbursable meal— not to cover all costs for all school districts. State agencies establish the per-meal rates of reimbursement for school districts in their states. According to USDA officials, all states currently use the same USDA reimbursement schedule to provide per-meal reimbursements to school districts. Some school districts have chosen to provide universal free meals under special provisions, designated as Provision 2, Provision 3, and Community Eligibility Provision (CEP). Participating schools provide free meals to all children, regardless of their household income. Under these provisions, schools cover any meal costs not reimbursed by USDA in exchange for a reduced administrative burden on school districts for processing school meal applications and determining eligibility for free and reduced-price meals. USDA reimbursement for schools participating under the special provisions is different than for schools under the standard program. Any school or school district can elect to participate in Provision 2 or 3. However, to elect CEP, schools or school districts must have at least 40 percent of students certified for free meals without the use of an application (for example, those directly certified through SNAP) in the prior school year. USDA calculates reimbursements for meals served differently under each policy, so in deciding whether to participate, schools must consider this, as well as the amount they would have to cover for meals not reimbursed by USDA. Income eligibility guidelines for most means-tested federal programs have historically not varied across the country based on differences in the cost of living. Some exceptions include federal housing assistance eligibility, which is based on median income for a given location; federal training program eligibility, which is based on variations in the cost of living across the country; and the federal Child Care and Development Fund, which allows states to provide child care subsidies to qualifying families with incomes below 85 percent of state median income. Despite the common use of standard federal poverty guidelines to determine eligibility, several data sources have been developed that show geographic variation in the cost of various good and services. (See table 2.) While some of these data sources measure prices of a particular basket of goods, services, and, in some cases, wages—some of which may vary by state, region, or locality—none includes quality of life measures for such things as pollution, crime rates, health system quality, traffic, and public amenities. According to the economic literature, conceptually, a cost-of-living index should include these quality of life measures. Therefore, the data sources listed in table 2 can be thought of as proxy measures for the cost of living. USDA provides the same school meal reimbursement rates for all the similar to other federal programs, such as SNAP, contiguous states,which provides the same benefit payment rates for participants in the contiguous states. However, USDA has collected data on school foodservice costs and has reported that there are variations in these costs among schools and these costs vary across the country.addition, there are other data sources that show geographic variation in labor costs, a major component of school foodservice costs. See table 3 for a list of data sources that show geographic variation in costs of labor. While such sources show evidence of geographic differences in labor costs, it has not been established that these differences would apply to school foodservice operations. Food is also a major component of school foodservice costs, but regional variation in the cost of food faced by schools is not represented by any existing price data or index. We identified two indexes that satisfied key considerations during our process of reviewing data sources to identify those that could be used to adjust eligibility guidelines for federal school meal programs for geographic differences in the cost of living. In assessing the overall suitability of various measures for making cost-of-living adjustments to the school meal programs, we used the following key considerations to guide our analysis: Goods covered: Which goods are taken into account in constructing the cost-of-living index? Do the goods included contribute substantially to the cost of living? Geographic coverage: What geographic areas are the underlying data drawn from? Does the index capture variation in costs of living at the regional, state, or sub-state level? Time frame: Are the estimates regularly updated and if so, how often? Could the cost-of-living estimates be used to update annual eligibility thresholds and reimbursement levels? Income group sampled: To what extent does the cost-of-living index reflect or include costs for the lower-income quintiles (i.e., the target population of free and reduced-price lunches)? Methodological transparency: Do we know and understand the process? Bias: Could weaknesses in the underlying data or in the methodology cause the cost of living to be systematically over- or underestimated in a given area or areas? What was done to reduce bias and improve accuracy in the estimates? Underlying data: Are the underlying data complete, accurate, and reliable? Regional Price Parities (RPP) are a type of price index that allows price levels of multiple goods and services to be compared from place to place. RPPs include prices from a wide range of consumer goods and services collected for use in the Consumer Price Index and supplemented with housing data from the American Community Survey. RPPs compare the price level of goods and services in one location to the average price level of goods and services in all locations. The United States national average is set at 100, and different locations are above 100 if price levels are higher than average in that area and below 100 if price levels are lower than average in that area. We evaluated all of the potential cost-of-living measures against these key considerations. Specifically, we eliminated from consideration data sources that (1) do not cover goods that make a significant contribution to overall costs of living, (2) do not cover all states, (3) are not updated regularly, and (4) do not include low-income individuals in the sampling framework. Table 6 in appendix I summarizes our analysis. We reviewed documentation for each data source to determine whether it had methodological characteristics that would limit its use for the purpose of adjustments for school meal eligibility.