From: Megan Schaper, Food Service Director

To: Board of School Directors

Dr. Patricia Best, Superintendent

From: Megan Schaper, Food Service Director

RE: Mid-Year Report on Food Service Operations

Date: March 23, 2009

It is a pleasure to report once again on the operations of the district’s food service program. This report traditionally focuses on the financial results of the past school year as well as on projections for the current year. I will also take this opportunity to update the board on a few initiatives and issues affecting the food service program.

As reported to the board this past fall, the food service program incurred an operating loss of $32,226 in 2007-08. The loss was able to be absorbed by the program’s fund balance, though the general fund did transfer money to replace several major pieces of food service equipment. A profit/loss statement for the program is included as Appendix 1.

2007-08 Income

The food service program generates revenue from a variety of sources. The majority of the program’s income, more than 80%, comes from lunch sales, a la carte sales, and federal and state subsidies. The following chart depicts the contributions of all of our revenue sources:

School Lunch & Breakfast Sales

Despite a price increase of $.10 at the elementary level and $.15 at the secondary schools for the 2007-08 school year, lunch sales were strong. The chart below shows a decrease in meals, but this simply reflects the fact that we changed the way in which we collect payment for (and therefore count) charter school meals. Adding in the 17,029 meals sold directly to the charter schools without claiming for reimbursement, we served 3,400 additional meals last year.

The meal increases in the most recent years can be attributed to several factors. The tighter economy and our on-line service that helps parents monitor their children’s accounts are motivating parents to put more limits on their children’s a la carte spending. We’ve had many requests to put restrictions on students’ accounts to allow only full meal purchases. Further, in this current school year, our decision to reduce the number of side dishes included with a meal changed the threshold of the number of items needed for a student’s choices to be counted as a reimbursable meal. Some student choices (an entrée and one other food item) can be counted as a meal this year that would have been charged as a la carte last year. Finally, school lunch participation continues to increase because we work very hard to meet our customers’ needs. I’ll address this more in a later section of this repot.

School breakfast is not a heavily utilized program in the State College Area School District. We served 89,900 breakfasts last year or about 513 per school day. Sixty percent of the breakfasts served at school are to students receiving subsidized meal benefits. As breakfast in generally served as “grab & go”, it is most successful in the schools where we have teacher support for kids eating in the classroom.

Federal and state subsidies are received for each meal served and provide about 20% of our total revenue. There was a significant increase in the reimbursement rates for the current school year for the free and reduced priced meal categories as shown below.

Full-Price Meals / Reduced Price Meals / Free Meals
2007-08 / 2008-09 / 2007-08 / 2008-09 / 2007-08 / 2008-09
Breakfast / $ .34 / $.35 / $1.15 / $1.20 / $1.45 / $1.50
Lunch / $.35 / $.36 / $2.19 / $2.29 / $2.59 / $2.69

Less than fifteen percent of our students received free or reduced priced meal benefits last year, and twenty percent of our meals served are at the free or reduced price. We are fortunate that most of our families do not qualify for subsidized meals, but the result is that we receive far less government funding for our program than many other districts.

I was recently asked why our meal prices were so much higher than those in the Altoona Area School District. A quick conversation with the food service director there confirmed that fifty four percent of their students are eligible for subsidized meals and eighty percent of the meals served are at a subsidized rate. When USDA pays $2.69 for the majority of the meals served, a school can afford to lose money on the few meals sold at the paid rate.

A chart detailing our schools’ free and reduced price meal eligibility data and participation data for 2007-08 is included as Appendix 2.

A la Carte & Milk Sales

As more students are purchasing reimbursable meals, they are spending less on a la carte food items. Whereas a la carte sales used to account for as much as 30% of our total revenue, it has decreased to about 23%. A la carte purchases include vending sales and snack bar sales as well as sales of components of the school lunch that aren’t selected in a combination as required to be counted as a meal (just a sandwich or just a piece of fruit).

The precipitous decrease in a la carte in 2006 depicted on the following page coincides with the implementation of the wellness policy. Our policy put an end to soda machines at the high school, a limit on snack purchases at the middle schools, and eliminated snack sales in the elementary schools. A la carte sales traditionally help to pay for our operations as these food items require little labor to produce and have high profit margins. But these food items often are not nutrient dense, and it truly is in the best interest of students that they are being limited. The obvious difficulty now is finding other means to keep our program fiscally self-sufficient.

Milk sales surged in 2007-08 in part due to a $.05 price increase, but also as a result of a dramatic increase in the number of units sold. We switched to recyclable, plastic milk cartons last year, and the students responded very positively to the change. Unfortunately the plastic packaging adds an additional $.05 to our purchase price. To avoid lunch price increases for 2008-09, we switched back to the paper cartons. We have had customer complaints about the return to the paper cartons. They liked the taste of the milk in the plastic containers better and sales of the paper cartons are much lower. I plan to request bid pricing for the plastic bottles for next school year. If the income generated by increased sales can cover the added cost, we will switch back to plastic.

Other Revenue Sources

Special functions (catering) and contracted sales are important sources of revenue for our program. In 2007-08, Little Lion’s Paw Catering completed 199 contracts contributing $96,600 to program income. Events included district in-service meetings, student orientations, football and field hockey pre-game meals, cross country and field hockey banquets, a volleyball coaches clinic, PDS intern retreats, and the Focus on Strong Families workshop just to name a few.

Contracted sales include the sale of meals to Nittany Christian School, Young Scholars Charter School, Centre Learning Community, and Nittany Valley Charter School. (We chose not to renew the contract with Nittany Valley Charter School for the current school year due to low participation.) This revenue account increased greatly in 2007-08 simply reflecting that we no longer included charter school meals sales as part of our National School Lunch Program agreement. Rather than claiming these meals for reimbursement, we charge the schools directly for the meal price plus the value of the reimbursement to be received. The charter schools have assumed the responsibility of claiming their own meals for reimbursement from PDE.

2007-08 will most likely be the last year that we receive Fresh Fruit and Vegetable Program grant funding. We were extremely fortunate to have this funding to provide fresh produce snacks to students at Panorama & Boalsburg in 2006-08 and at PFE for the two years previous. Through the years that we had funding, our students sent letters to Congress asking for the grant to be continued and expanded. The good news is that federal funding for the grants was increased. The bad news is that the grant now targets schools with at least 50% free and reduced priced meals eligibility which makes our schools ineligible.

2007-08 Expenditures

As noted earlier, expenditures exceeded our income in 2007-08. The chart below graphs expenditures as a percentage of income, and therefore, adds up to more than a full pie – 101%

The largest expense, nearly 50% of income, is labor and associated benefits. We use our staff as efficiently as possible. Even as our sales increased over the years, our staffing levels have remained fairly stable. As a result, we produced 17. 8 meals per labor hour in 2007-08. Ten years ago, our meals per labor hour ratio was 12.8:1. We employ 6 non-bargaining unit supervisors, 27 full-time kitchen staff, 44 part-time kitchen staff, 2 full-time truck drivers, 1 full-time secretary, and 1 full-time bookkeeper who all work very hard to make this program successful.

Food & Milk

The most obvious expense of providing school meals is the cost of the food. Our food and milk purchases for 2007-08 were nearly 45% of income. We were able to keep our cost of food nearly to the previous year’s level despite double digit increases in the cost of food in grocery stores. We were able to do this by locking in pricing early through our own local bids and a cooperative bid with the Pittsburgh Regional Food Service Directors.

By purchasing milk in paper cartons instead of plastic and by reducing the number of side dishes available with the meal from three to two, we have been able to reduce food costs by about 3% this year. This should save the food service program well over $100,000. We had some customer complaints at the beginning of the year about the reduced meal size. But all seemed to understand and appreciate our efforts to keep school meals affordable.

Other Expenses

The direct expenses listed on the profit/loss statement include costs for paper and cleaning supplies, uniforms, training, utilities, printing, postage, software licensing and support, travel, repairs, etc. These items are budgeted and accounted for separately, but have been condensed for this report. These items generally cost more each year, and as our program profitability has become less of a given fact, we’ve pinched pennies and cut back. We were able to maintain direct expenses at 5.5% of sales in 2007-08, the same percentage as the previous year.

The general fund transferred $78,497 to the food service program to replace two dishwashers and a steamer. Non-capital equipment replacement - several milk coolers, a garbage disposal, a warmer, and various computer equipment totaling $23,164 – was paid for through the food service program budget.

Unfortunately, operating expenses for 2007-08 exceeded income by $32,226. When the general fund transfer and depreciation are factored in, the net loss was $20,437. The loss was absorbed by the food service departments fund balance.

The food service budget for 2008-09 projects another loss. However, the program is just slightly operating at a profit as of the end of February. Using that current data, I’ve revised our projections to reflect a year end profit. This projection is included as part of the profit/loss statement at the end of this report.

This concludes the review of the program’s fiscal results. I’d like to use the remainder of this report to inform the board about a few issues and activities affecting the food service department.

This has actually been a fairly quiet year for the food service department. Because of some staffing issues in our office, one secretary off on medical leave from July – March and another accepting a position at Penn State in December, it was a year to focus on basic operations rather than starting any new, big projects. So, I have no major initiatives to report on but rather just some of our routine activities.

Staff Development

I always like to include a little information about our training initiatives for food service staff. As our program has been less financially successful these past few years, I sometimes worry that cost cutting might result in less time for training food service employees. Many school districts do not provide dedicated time for staff training thinking that they can’t afford it. I truly think that we can’t afford not to train. Proper training helps employees to work more productively and cost effectively. Because they are well trained, our staff confidently prepares and serves meals to meet USDA regulations. And most importantly, training ensures that students won’t be exposed to unsafe food handling practices and food borne illnesses.

Twenty-two staff members and I participated in ServSafe training this past August. The training, developed by the National Restaurant Association, is the industry standard for ensuring safe food handling practices. Eighteen of the class participants passed a certification exam at the end of the course. Of the five who did not initially pass, two retook the exam and subsequently passed. All of our managers, supervisors, and head cooks are included on a training schedule to be recertified every five years.