Mr. DAVIS. Essentially, this bill is of course designed to provide a more equitable apportionment of the school lunch funds among the States. To do that, we feel we have outgrown the previous legislation which provided for that apportionment on the basis of child population plus relative per capita income of the States. At this point it would be much more equitable to apportion the money among the States, as provided in the bill, on the basis of actual participation in the program plus the relative need of the State. By apportioning it on the basis of the actual participation in the program, we feel that we are giving recognition to those areas that have made greater progress in extending the school lunch to more children rather than, under the old formula, penalizing them by forcing them to divide their money among more children. The new bill would provide the money on the basis of the number of children among whom the money would be divided in reimbursement payments for lunches. Essentially, that is what this bill does. In order to minimize the impact of certain changes this bill will bring about in the amount of money the several States will get the first year, we would like to provide an interim arrangement whereby the new formula would be applied toward half the total available funds, and the old formula to the other half. The other basic feature of the bill would make provision for use of part of the appropriation for special assistance to especially needy schools throughout the country. In working with the formula, trying to develop the new formula, we found that, regardless of the method we used for apportioning the money, there still remained the problem of some very needy school that would not receive enough to provide free meals or reduced-cost meals to all the children who needed it. The bill provides for some special assistance funds out of the annual apropriations. The formula is so designed that for those States at or above the average per capita income for the Nation, there will be a certain minimum amount of money based on participation, and those States which are under the national average will get varying amounts based on the need of the State. I believe that is about all I would need to say at this point, Mr. Chairman. I would be glad to answer any questions the committee might have. Mr. BAILEY. I would suggest that the witness review briefly the status of the School Lunch Act at the present time. I notice you deal with it on the first page of your formal presentation. Give us a little résumé of that. This is Mr. DAVIS. Our estimates for the current fiscal year are that the average payment per meal will probably run about 4.2 cents. based upon an increased appropriation this year which will provide cash assistance, to be apportioned among the States, of $98.6 million. In addition to that, the current appropriation will provide for $14.4 million for special purchases as provided in the act. In addition, the Congress added to the original appropriation $10 million additional for food purchases under section 6 of the act. Further, they provided for $45 million to be transferred from section 32, also for direct purchases of food to be distributed to the States. This, of course, is all in addition to the commodities which will be made available to the schools as a result of surplus removal purchases and our price-support program. Our present estimate is that this quantity will represent a cost of about $100 million, or in total the Federal assistance will run to $268 million. We estimate approximately 131⁄2 million children will participate this year, and this represents, I believe, somewhat more than 31 percent of the school enrollment. Mr. BAILEY. I note the comments on page 2 of your presentation with respect to the additional $10 million made available for section 6 commodity purposes. Is the $2 million in addition to the $14.4 million, or is that included in the $14.4 million in your breakdown? Mr. DAVIS. No, sir; that is included in the $10 million additional which I mentioned, which was made available for direct purchases this year. There was quite a bit of legislative history to that $10 million. As I recall, in the House appropriations bill, I believe they added $10 million in cash to be used for special assistance. When the Senate reported the bill out, they deleted the $10 million. In conference they put the $10 million back in, but made the $10 million available not as cash but for the purpose of purchasing food nationally and shipping it out to the schools, with the further provision that up to $21⁄2 million of that $10 million could be used to make purchases to be used for special assistance for especially needy schools. Mr. BAILEY. Will you go into that somewhat in detail, stating the purpose of that program. Mr. DAVIS. We have not yet worked out all of the program details, just how the $21⁄2 million will be expended. However, we had a group of representative State directors, both our direct distribution program and our school lunch program, in Washington last week to give us their best suggestions on how we might go about using this $21⁄2 million worth of commodities to aid these particularly needy schools. As a result of that, they recommended that perhaps our first priority or our first aim should be in the nature of special purchases which would enable schools which do not now have a school lunch program to initiate one. Mr. BAILEY. May I interrupt to inquire how many of the States do not have a program? Mr. DAVIS. All of the States have the school lunch program. Actually, the school lunch program is available in schools which represent about two-thirds of the Nation's enrollment. About half of those two-thirds actually participate in the program, on the average. Of course, many of those children participate part of the time during the year. All of the States have the national school lunch program, including Puerto Rico, the Virgin Islands, and Guam. They all have tried to provide, to the extent they were able, for free lunches for those children who could not afford them. However, as you well know, in certain sections of certain States there are areas which are in extremely difficult economic condition, and their requirement for free meals is so great that some schools just cannot afford a program at all. Mr. BAILEY. I think that is the situation in my State particularly. Mr. DAVIS. In many areas; yes, sir. Mr. BAILEY. There are too many free meals involved. Mr. DAVIS. We requested cash to attempt to meet this problem over and above the regular school lunch program. With the com modities we will try to carry out the same aim. This probably will take the nature of, let us say, special purchases which would enable a school with no equipment to serve at least a bag lunch, always remembering that we would try in all instances to enable the school to serve a lunch which would meet the same nutrition requirements as the regular lunch, but it might be served in a little different form. Through the assistance we might give with those special purchases, it would be possible; whereas it might not be possible with the commodities we already have available. Mr. BAILEY. Have you some questions, Mr. Brademas? Mr. BRADEMAS. No questions, Mr. Chairman. Mr. BAILEY. Mr. Quie. Mr. QUIE. Mr. Davis, will you tell me what section 416 donations are? I have forgotten. Mr. DAVIS. Section 416 is a section of the Agricultural Act of 1949 which has since been incorporated in Public Law 480 in title III and further amended many times. It is the authority under which the Commodity Credit Corporation, when the inventory stocks which it has acquired under the price support program cannot be sold back into the market without disrupting the market, may donate the commodities, first to schools, institutions, and needy families in this country, and then this is also the authority under which we donate through the U.S. voluntary agencies to needy persons overseas. Mr. QUIE. This is the same program by which we donate to welfare agencies? Mr. DAVIS. Yes, sir. Mr. QUIE. It goes first to school lunches, and then to welfare agencies in this country? Mr. DAVIS. Yes, sir; that is correct. Of course, the commodities donated under this authority are just those for which there is a price support program, such as dairy products. We acquire flour, cornmeal, rice, and a number of other commodities under this section 416 authority. For the perishable groups, those not under price support, if the market conditions warrant, we use section 32 money for surplus removal purchases. Commodities so acquired are also distributed to the schools, and then in some instances to needy families in this country. Mr. QUIE. What commodities will be available under title III of Public Law 480 in this coming school year, do you think? Mr. DAVIS. Butter, cheese, nonfat dry milk, rice, flour, cornmeal. Mr. QUIE. Will there be enough of all these commodities to fulfill all the needs of our school lunch donations and welfare programs in this country and enough for overseas as well, of all of these six commodities? Mr. DAVIS. We will have enough of all of them for our domestic program. Only a few of them will be available for oversea donationflour, cornmeal, some rice (we are not sure how much at this point), and nonfat dry milk. As far as we know at this time, no butter and no cheese. Mr. QUIE. In the fiscal year 1961-62, you have an estimated cost. of $100 million for sections 32 and 416 donations. How much of this is section 416 donations? Mr. DAVIS. I believe possibly one-third. I would want to check that. I do not have that breakdown with me. Part of this depends on whether or not we use section 32 money to purchase from Commodity Credit for the purpose of donating. There is a fiscal paperwork technicality to that. So we may draw more on section 416 funds and less on section 32, depending on the availability of the section 32 money. Let me say in the past we have used section 32 money to purchase a commodity from the Commodity Credit Corporation and then donate it. In the final analysis, the Commodity Credit Corporation is made whole. The expenditure is from section 32. Mr. QUIE. On page 2, you show transfer from section 32. Is that the transaction? Mr. DAVIS. This is in addition; the funds, which this year amount to $45 million, which were authorized to be transferred from section 32 to the school lunch appropriation for the purposes of section 6 of the School Lunch Act, which means that rather than being available only for commodities which are in marketing difficulty, which are surplus, we can use this $45 million the same way we use the school lunch appropriation; in other words, to buy foods which the schools. want and we feel the program needs-with one extra admonition from Congress in the legislative history of this transfer, that insofar as possible we would use it for those commodities which are perhaps on the borderline of being in surplus, all other things being equal. Mr. QUIE. What is the limiting factor on your transfer of section 32 funds? Is it the authorization of $45 million? In Mr. DAVIS. It is in the Agriculture appropriation language. addition to the $125 million appropriation, there is also authorized to be transferred from section 32 $45 million to be used for the purposes of section 6 of the National School Lunch Act. Mr. QUIE. This is in the appropriation bill, is that right? Mr. GARLAND. I have no questions. I offer my apologies for coming in late this morning. I was tied up in the office. Mr. BAILEY. Have you any brief questions you might ask at this time, Mr. O'Hara? Mr. O'HARA. I will not take any further time. I want to thank Mr. Davis for his testimony. Under this new allocation formula would we expect, and the new special assistance provisions to particularly needy schools and communities, there would be a request for a somewhat larger appropriation in the next budget request that we receive? Mr. DAVIS. Of course, the Department is currently in the process of developing its 1963 budget for presentation to the Budget Bureau and the President. The President has made it quite clear that he regards the school lunch program as important, that he would like us to exert every effort we could to reach all of the children who need a lunch, and I am sure all of these things will be taken into consideration when the budget estimates are submitted, along with all of the other many urgent needs for the Department. Mr. O'HARA. Thank you, Mr. Davis. I have great confidence in these proposals and in the progress which has been made under the school lunch program. I hope the adoption of this legislation will help the Department to further improve the program. I am looking forward to making this of more advantage to more children in the future. Mr. DAVIS. Thank you. Mr. BAILEY. I notice at the top of page 4 you state: We felt the bill, as drafted for the subcommittee, was in line with the President's school lunch recommendations contained in his farm message to the Congress. It was subsequently submitted to the subcommittee with the approval of the Department and with advice from the Bureau of the Budget that the proposed legislation was in accordance with the President's program. The Department did, however, recommend that a 1-year transition period be provided in order to assist in an orderly change between the old and new method of apportioning cash assistance funds. What do you mean by "a 1-year transition period"? Mr. DAVIS. First of all, the bill as drafted will provide, we feel, a more equitable distribution of funds regardless of the level of the appropriation. However, there will obviously be some rather sharp adjustments for some States. At the current level of the appropriation this would mean a fair reduction in the amount of money some States would get in order to give additional money to States with higher participation and greater need. In order to cushion the shock of some of these possible reductions we felt it would be advisable to take it in one step and apply the formula for only half of the funds for the first year in order to make these reductions in funds a little less the first year to enable the States to adjust their budgets to give them time perhaps to go back to their legislatures or their local government bodies, so it is merely a device to make the transition less sharp and to give the States a little more time to adjust to whatever reduction they might find is necessary. Mr. BAILEY. Would you stay in the committee room for a while if it is not an inconvenience? We may have further questions. Mr. QUIE. Do you project any substantial increase in the number of schools which will participate in the school lunch program or has this been a pretty steady increase each year? Mr. DAVIS. A rather steady increase over the past 4 or 5 years, I would say, somewhere between 6 and 8 percent increase each year. That is against an increase in school population of around 3 or 4 percent each year. That increase would have a bearing on the increase of the participation in the school lunch program as well. It has been running around 6 to 8 percent, and at this time I believe we would project for 1963 perhaps a 6-percent increase again. Mr. QUIE. What would you project 5 years from now? You state this represents 32 percent of the children enrolled now. What would you think would be the number receiving school lunches 5 years from now? Mr. DAVIS. Looking back over the 15-year history of the program under this act it would appear to us that probably it would continue to run somewhere close to one-third of the total population. There are many factors that affect participation. It may possibly increase much faster in the next 5 years than it has in the last 5 years. Partially that would depend on a matter which I imagine this committee has been concerned with, and that is the building of more consolidated schools and a fewer number of one-room schools. There has been a marked trend in that direction for some time. This would tend to put more of the children in schools which might have facilities |