True Cost of SFUSD Revolution Foods Meal Contract is Unknown

by Dana Woldow, 2013-01-07

History is being made today as a new meal contract with Revolution Foods brings fresh lunches into every SFUSD school for the first time in modern memory. Exciting as this is, it's a little scary to realize that no one knows how long SFUSD will be able to afford these higher quality, higher priced meals.

Although the new meal contract runs through the end of the 2013-14 school year, with the option to roll over through 2017, SFUSD can terminate with just 30 days notice. Termination would likely only happen if the cost of the meals far exceeded the amount Student Nutrition Services (SNS) budgeted for food. SFUSD still faces a budget shortfall for the foreseeable future, and the Board of Education doesn't want the SNS deficit to increase above its current $1.9 million level.


So the question remains: how long will SFUSD be able to afford its pricey new meals?

Savvy school board members peppered SFUSD Director of Policy and Planning Orla O'Keeffe with questions at the December 17th Board of Education meeting to vote on the contract. O'Keeffe led the contract presentation for SNS, a department she oversees, but did not divulge the specific costs of the new meals, other than to say that the cost per elementary school lunch would be increasing from $1.794 to $1.95.

Hearing that the cost per elementary lunch was increasing by over 15 cents, school board members were justifiably curious as to the total additional cost of the new meal contract.

O'Keefe repeatedly insisted that all of the higher costs for this school year had already been accounted for in the budget the Board of Education passed last June; deputy superintendent Myong Leigh, O'Keeffe's boss, echoed that claim. Board members were skeptical, and asked over and over what impact the higher priced meals would have on the existing $1.9 million SNS deficit.

Commissioner Sandra Fewer wanted to know what the impact would be on the SNS budget not just during the current year, but also for the remaining 12 months of the 18-month contract. Would the SNS deficit increase in 2013-14?

O'Keeffe maintained that it would not, that all increases had already been accounted for in the 2012-13 budget, and that similar numbers for 2013-14 would be sufficient to cover the increased cost. She said department budgeting last spring took into account rising consumer prices for food, as well as the new USDA regulations requiring increased portions of more costly whole grains, fruits and vegetables, effective at the start of 2012-13; the result, she said, was that more money was added to the SNS budget for food to offset these anticipated increases.

To a point, O'Keeffe is correct - the amount of money set aside specifically for food in the budget which the BOE approved last summer for 2012-13, increased more than $900,000 over the "unaudited actual" budget for 2011-12. Food is included in the line item called "books and supplies", which also covers a separate milk contract, food for additional lunch choices offered at middle and high schools (also a separate contract), and some equipment.

However, there is no guarantee that the extra $900,000 or so included in the 2012-13 budget will be sufficient to cover all of the extra cost of the new fresh meal contract; in fact, it is probably only enough to cover the rising price of food generally, and the anticipated extra cost of meeting new USDA regulations, not the additional premium price of freshly prepared meals.

Insisting to the Board that the new meals will not add to the department deficit, when the numbers show otherwise, creates a situation in which Commissioners may feel obligated to ask for cuts to the meal program if the SNS deficit does, in fact, increase. Meal quality has been cut in the past when costs rise, most recently at the start of this school year. The time for an honest assessment of potential deficit increase is now, not after the fact.

To understand what increased costs likely will and will not be covered by the additional approximately $900,000 O'Keeffe was referencing, it is necessary to examine three figures - the per-meal price paid to vendor Preferred Meal Systems in 2011-12; the higher price paid for the same frozen Preferred meal in the first semester of 2012-13 (which reflects higher food prices generally and compliance with new USDA regulations); and the even higher price charged by Revolution Foods for a fresh meal during the second semester of 2012-13.

Based on data from prior years, about 15,000 students in grades K-5 eat school lunch each day; another 7,000 combined middle and high school students also eat school lunch, although some of them choose other lunch options offered in addition to the standard cafeteria meal.

In 2011-12, SNS paid Preferred $1.54 for each K-5 lunch purchased. During the first semester of 2012-13, rising food costs and new USDA regs drove that price up to $1.794 per meal (an increase of 25.4 cents.) Over the 84 instructional days of the first semester, the additional cost, as compared to 2011, would be about $320,000 for those 15,000 daily lunches.

During the second semester, Revolution Foods will be paid $1.95 for each K-5 lunch (a further increase of 15.6 cents, for a total increase of 41 cents over the 2011-12 price.) The 15,000 daily elementary lunches for those 95 days will cost about $585,000 more than what was paid in 2011-12.

Adding costs for both semesters together, the cost increase in 2012-13 is projected to be about $905,000 higher than in 2011-12 - and that is just for elementary lunch. There will also be cost increases for middle and high school lunch, as well as for breakfast and after school snack.

Breakfast at all grade levels cost SNS 96 cents in 2011-12. The approximately 5500 daily breakfasts served this year cost $1.018 during the first semester, an increase of 5.8 cents per meal, or about $26,800. The cost will rise in second semester to $1.14 (total increase of 18 cents over 2011-12) for a projected increase of about $94,000 over 2011-12 prices, bringing the total breakfast increase for the full school year to about $120,000, as compared to 2011-12.

After school snack prices were 62 cents in 2011-12, rising to 70 cents for the first semester of 2012-13, and 75 cents when Rev Foods takes over for the second semester. For the approximately 6000 daily snacks served, that means that first semester costs were about $25,000 higher than 2011-12, and second semester is projected to be about $74,000 higher, for a total increased snack cost of just under $100,000 for the year, as compared to 2011-12.

Add that to the $905,000 increase in costs already anticipated for elementary school lunch, and the $120,000 in additional costs for breakfast, and the total increased costs for the year come out at about $1,125,000 - and that is still without middle and high school lunch costs figured in.

It's hard to figure costs for older students because it is impossible to predict whether they will choose a Revolution lunch, or one of the other options offered. Let's assume half of the approximately 3000 middle and 4000 high school students eating school lunch choose the Rev Foods meal.

Price increases for both first and second semester were higher at middle and high school than at elementary. First semester middle school lunch cost SNS 38.6 cents more than in 2011-12, and second semester 53 cents more; high school lunch cost 43 cents more in first semester and 50 cents more in second semester. Assuming about 1500 middle school students choose the hot lunch, the cost for 2012-13 will be about $124,000 higher than 2011-12, and for high school, about $167,000 higher, for a total increase of about $290,000.

Add that to the $1,125,000 from all other meals, and the food costs for 2012-13 come to about $1,415,000 more than in 2011-12.

But wait - didn't Orla O'Keeffe say that all of the increased costs had already been accounted for in the 2012-13 budget approved by the school board last June, because it contained about $900,000 more for food? In what universe does $900,000 stretch to cover $1.4 million?

The idea that the amount of extra money needed to cover food costs this year could have been accurately predicted during budgeting last spring is preposterous. Unless SFUSD staff have developed clairvoyant powers, they could not know last spring, before the invitation for bids on the fresh meal contract was even issued, what the prices for freshly prepared meals would be until the sealed bids were opened 6 months later, on November 13th. This kind of off the wall logic is so unlike the normally meticulous O'Keefe, or anyone within SNS, that I have to wonder if aliens might have been controlling her brain during the school board meeting.

I can't imagine what anyone hoped to accomplish by minimizing the potential impact of the new contract on the SNS bottom line. Even if it was believed that the extra $900,000 in the food budget would cover all increased costs (which would demonstrate an alarming lack of ability to do simple math for anyone involved with budgeting), it is always better to "under promise and over deliver" than to do the opposite. Why not let the school board know, while everyone was excited about the possibility of fresh tasty meals, that the costs might be a bit more than anticipated?

The perfect opportunity to lay the groundwork for acceptance of a possibly higher deficit came when Commissioner Fewer indicated that an increase of half a million dollars would not be worrisome to her, but that she needed to know for sure that the increased deficit would not be $4 million, or $10 million. "Just give me a ballpark figure," Fewer pleaded. At that point O'Keeffe could have said, "We anticipate that the impact will be no more than half a million dollars." Then, if the deficit does not increase at all, SNS look like fiscal geniuses, while still providing cover for the department if the deficit does, in fact, rise.

Instead, O'Keeffe stuck to her claim that there would be no impact on the SNS deficit, not in 2012-13, and not in 20123-14 either. I wonder how that is going to work. In the current school year, food costs are on track to increase by $1.4 million. In 2013-14, the total yearly meal cost will be even higher than in 2012-13, because next year all meals (not just second semester) will be at Revolution Foods' higher prices.

Assuming stable meal participation, the cost for the 15,000 daily K-5 lunches for first semester of 2013-14 is likely to be $196,000 higher than first semester of 2012-13, plus an additional $56,000 for breakfast, $25,000 for snack, $18,000 for 1500 middle school lunches and $11,000 for 2000 high school lunches; that means more than $305,000 additional cost, for a total extra cost of about $1.72 million in 2013-14 as compared to actual food costs for 2011-12. Will that extra $900,000 included for food in the 2012-13 budget be enough to cover $1.72 million?

It shouldn't be too much to expect that district staff be forthcoming about the real costs of this contract, even if it requires admitting that the SNS deficit may creep a little higher. The Board already indicated that an additional half million dollars or so would not be worrisome; they just need to be sure that the contract won't saddle the cash-strapped district with millions in extra costs.

Commissioner Rachel Norton said at the meeting, "To get more we have to pay more, and I am comfortable with that if it means we are getting better food to students", and Commissioner Jill Wynns affirmed, "We are willing to make that investment in our students and their achievement."

For too long, student have been served mediocre food because the cost of running a school meals program in an expensive city like SF far outpaces the money provided by the government. Our Board of Education has always been willing to pick up the slack and provide extra money from the general fund, even when it was to underwrite food the students didn't like. Now that SNS is finally able to put a tasty meal on the table, the Board deserves the courtesy of honest answers when they ask simple questions about the cost of that meal.

Dana Woldow has been a school food advocate since 2002 and shares what she has learned at PEACHSF.org. Follow her on Twitter @nestwife.