The 25% Threshold Was the Easy Part: How the 1.6 Multiplier and Non-Federal Funding Rule Decide Whether Newly Eligible Districts Actually Elect CEP

On October 26, 2023, a final rule from USDA’s Food and Nutrition Service took effect that lowered the minimum identified student percentage (ISP) for the Community Eligibility Provision from 40 percent to 25 percent. The rule, published at 88 FR 65778 (Sept. 26, 2023) and codified at 7 CFR 245.9(f), expands the pool of local educational agencies, schools, and groups of schools that may elect CEP. It does not require any of them to do so.

That distinction matters more than the headline number. The threshold determines eligibility. The election decision is a financial calculation, and for a district newly eligible at 25 percent ISP, the calculation is materially worse than it was for districts that qualified at 40 percent. The multiplier and the non-federal funding requirement, not the threshold, are what decide whether newly eligible districts actually serve all students at no charge.

What the rule changed, precisely

The final rule amends 7 CFR 245.9(f) to require an LEA, group of schools, or individual school to have an ISP of at least 25 percent as of April 1 of the school year prior to implementing CEP. The prior regulatory floor was 40 percent. The rule is effective October 26, 2023, and USDA states it imposes no new requirements on LEAs or schools.

CEP itself is a reimbursement alternative for LEAs and schools participating in both the National School Lunch Program and the School Breakfast Program. It is authorized by the Healthy, Hunger-Free Kids Act of 2010 and codified at 7 CFR 245.9(f). Under CEP, schools serve breakfast and lunch at no cost to all enrolled students without collecting household applications. Reimbursement is instead based on the share of students who are categorically eligible for free meals through other means-tested programs.

The ISP is a ratio, and the ratio is the whole game

The identified student percentage is the number of identified students divided by total enrolled students. Identified students are those certified for free meals without a household application: students in households participating in SNAP, TANF, or the Food Distribution Program on Indian Reservations; students who are homeless, migrant, runaway, or in foster care; and Head Start participants. In states participating in Medicaid direct certification demonstration projects, students directly certified for free meals through Medicaid may also count, but only if certified for free rather than reduced-price meals.

Two features of that definition drive administrative outcomes. First, the ISP is a snapshot as of April 1 of the prior school year. A district whose SNAP caseload rises after that date, or whose direct certification match improves after that date, does not get credit until the following cycle. Second, the ISP counts identified students, not all low-income students. A district with substantial low-income enrollment that is not captured by SNAP, TANF, FDPIR, Medicaid demonstration matching, or the categorical categories will have an ISP below its poverty rate. The gap between free-and-reduced-price eligibility and identified-student status is the administrative exclusion that CEP is designed to route around, but the ISP still depends on the quality of the state’s direct certification system.

The 1.6 multiplier: why 25 percent is not 40 percent

USDA codified a multiplier of 1.6 at 7 CFR 245.9(f)(4)(vi). The ISP is multiplied by 1.6 to determine the percentage of meals reimbursed at the federal free rate. The remaining meals, up to 100 percent, are reimbursed at the federal paid rate. CEP schools claim meals only at the free and paid rates; they do not claim reduced-price meals.

The arithmetic is unforgiving at the new floor. A district with a 40 percent ISP claims 64 percent of meals at the free rate (40 × 1.6 = 64) and 36 percent at the paid rate. A district with a 25 percent ISP claims 40 percent at the free rate (25 × 1.6 = 40) and 60 percent at the paid rate. The newly eligible district at the threshold receives free-rate reimbursement on a substantially smaller share of the meals it serves than a district that qualified under the old floor. The federal subsidy per meal is lower, and the gap between federal reimbursement and operating cost is wider.

That gap is not hypothetical. The rule text states that CEP requires LEAs to pay, with non-federal funds, any costs of offering free meals to all students that exceed the federal assistance provided. If all operating costs are covered by federal assistance, the LEA is not required to contribute non-federal funds. But at a 25 percent ISP, the federal assistance covers a smaller share of the meal, and the LEA’s exposure grows.

The election decision is a budget decision

USDA describes CEP election as a voluntary decision made by LEAs based on their unique student populations, and the rule states that decisionmakers should consider student nutrition, educational, administrative, and financial factors. The financial factor is where the lowered threshold produces its most consequential effect.

For a district that was already eligible at 40 percent ISP, the multiplier produced a free-rate claiming percentage of at least 64 percent. For a district newly eligible at 25 percent ISP, the free-rate claiming percentage is 40 percent. The district must compare the federal reimbursement it would receive under CEP against the cost of serving free meals to all students, and it must identify non-federal funds to cover any shortfall. A district with a thin local budget, or one in a state that does not supplement federal reimbursement, may find that election is not financially viable even though it is now legally eligible.

This is the central administrative burden of the expanded CEP: not the application the district no longer collects, but the budget analysis it must now run to decide whether to elect. The rule eliminates household applications for districts that elect. It does not eliminate the cost calculation for districts that decline.

Grouping is a district-level design choice

The rule permits individual schools participating in CEP as part of a group to have an ISP lower than 25 percent, provided the group’s aggregate ISP is at least 25 percent. That provision changes the strategic calculus for districts with uneven poverty concentrations. A district can group a high-ISP school with lower-ISP schools so that the aggregate meets the threshold, allowing election across the group even where no individual school would qualify on its own.

Grouping is not automatic. It requires the district to calculate ISPs school by school, model the aggregate, and decide which schools to include. A district that groups too broadly may dilute its aggregate ISP below 25 percent; a district that groups too narrowly may leave eligible schools outside the election. The rule creates the option, but the district bears the analytical burden of using it.

The June 30 deadline and the decision cycle

USDA’s CEP page identifies June 30 as the annual election deadline for LEAs electing CEP for the following school year. The practical effect of the lowered threshold therefore depends on LEA decision cycles. A district that did not calculate its ISP, model its reimbursement, and identify non-federal funding before the deadline will not elect CEP for the following school year regardless of eligibility. The rule changes the legal floor; it does not change the calendar.

What the rule does not establish

The rule text and USDA’s program page describe the mechanism and the stated benefits: increased access to no-cost meals, elimination of unpaid meal charges, reduced stigma, and streamlined administration. They do not provide post-rule counts of newly eligible districts, election rates after the threshold change, or state-level variation in election. Those data are necessary to assess the rule’s practical effect, and they are not in the retrieved record. Claims that the rule caused a measurable increase in participation, or that it reduced administrative burden in practice, outrun the evidence.

What the evidence does establish is narrower and more useful for practitioners: the lowered threshold expands the eligible pool, but the 1.6 multiplier and the non-federal funding requirement mean that a district newly eligible at 25 percent ISP faces a different and harder financial calculation than a district that qualified at 40 percent. Eligibility is not election. The rule that lowered the threshold did not lower the multiplier, and it did not create a federal funding stream to cover the gap. Those are the terms on which newly eligible districts will decide.

FAQ

Does the 25 percent threshold mean a district at 25 percent ISP gets full federal reimbursement?

No. The ISP is multiplied by 1.6 to determine the share of meals reimbursed at the federal free rate. A 25 percent ISP yields a 40 percent free-rate claiming percentage. The remaining 60 percent of meals are claimed at the paid rate.

What happens if federal reimbursement does not cover the cost of serving all students free?

The LEA must pay the difference with non-federal funds. The rule states that CEP requires LEAs to pay, with non-federal funds, any costs of offering free meals to all students that exceed the federal assistance provided.

Can a school with an ISP below 25 percent participate in CEP?

Yes, if it participates as part of a group whose aggregate ISP is at least 25 percent. The rule permits individual schools in a group to have an ISP below 25 percent provided the group’s aggregate meets the threshold.

When must an LEA elect CEP for the following school year?

USDA’s CEP page identifies June 30 as the annual election deadline. LEAs should confirm procedures with their state agency.

Does CEP eliminate all administrative burden for participating districts?

CEP eliminates the collection of household applications for districts that elect. It does not eliminate the ISP calculation, the grouping analysis, the reimbursement modeling, or the non-federal funding determination that precede election. Districts that decline CEP retain the application and verification burden the rule was intended to reduce.