California could run out of cash to pay school districts that serve free and low-cost meals to needy students, just as the slumping economy is forcing more families to seek such help.

State Superintendent of Public Instruction Jack O'Connell said Wednesday that an unexpected jump in the number of free and reduced-cost breakfasts and lunches means the $125 million designated for reimbursement likely will run out well before the end of this school year.

"The unprecedented demand for school meals is yet another example of how the economic downturn is causing many families in California to turn to schools to feed their children and stretch their grocery dollars," O'Connell said. "More students than anticipated have consumed school meals this year, which means we will likely run out of state money to support the free and reduced-price meals program this fiscal year."

O'Connell asked Gov. Arnold Schwarzenegger and the Legislature for a $31 million budget increase over three years to help defray costs.

State educators said the economic downturn, along with increased nutritional standards for schools and higher costs for food, energy, labor and benefits, have contributed to a jump in the number of low-income children participating in the state's meal programs.

The state served more than 770 million meals to students who qualify for reduced-price or free meals in public schools in 2007-08, an increase of 28 million from the year before. That's a 4.5 percent jump — the biggest one-year increase the state has seen, O'Connell said. An estimated 51 percent, or 3.1 million students, qualified for free or low-cost meals in 2007-08; state officials still are tallying figures for this year.

California ran out of reimbursement money last school year in May, meaning that most districts were not paid back for meals served in May and June. Reimbursement could run out sooner this school year if the state does not act, O'Connell said.

The state currently pays 22 cents toward each free or discounted breakfast or lunch served, and the federal government pitches in from $2.17 to $2.57. A new state law provides an extra 6 cents to districts that do not serve fried foods or food containing trans fats.

Still, many educators say, the most a school district receives per meal is $2.85, often not enough to cover the entire cost. O'Connell warned that if additional money is not provided, local school districts — already strapped for cash because of the state budget crisis — will be forced to cut more to keep food on the cafeteria table.

The lack of reimbursement for districts such as Oakland and West Contra Costa Unified — where large percentages qualify for free or low-cost meals — could mean a loss of thousands of dollars in one month. Mt. Diablo did not receive reimbursement in June, putting that district out more than $17,000, said Kathleen Corrigan, director of food and nutrition services there.

In San Leandro, the number of children lining up for free- and discounted meals has swelled this year, said Food Services Director Aulani Cler. About 53 percent of the district's student population qualifies for discounted or free lunches, up from about 49 percent a year ago. Staff has been asked to watch inventory more closely than it has in the past, and children asking for seconds are now offered fruit and salad.

"A lot of kids are hungry, and one meal isn't enough," Cler said. "We can't afford to offer center-plate items anymore. We're trying to make ends meet. But at the same time, we won't deny any child a meal."

Other East Bay school districts have seen an increase in the number of eligible students as well. Demand jumped in Antioch by about 7.6 percent — from 9,200 students to 9,912. The Mt. Diablo school district saw a 7.13 percent increase from October 2007 to October this year, Corrigan said. The Hayward school district also experienced a 7 percent increase, officials estimate.

At Oakland Unified, where about two-thirds of students are eligible, Nutrition Services Director Jennifer LeBarre said she has not seen a higher demand but expects state cuts. Her team is working on strategies to reduce costs through scratch cooking and other means, without compromising the quality of the food.

"We're hoping it won't have a large impact on the students' experience," LeBarre said.

Other districts have not been affected. Burlingame School District officials braced for an increase in students seeking free or discounted lunches this year that so far has not materialized.

"That's great. It means our families don't have that increased need," said Robert Clark, the Burlingame district's chief business officer. "But other districts are probably the total opposite."

O'Connell could not estimate when reimbursement money would run out this year if the state does not act.

"Without quick action by the governor and Legislature, districts will be forced to make a series of unacceptable choices to dip further into their own bare-bones budgets, serve less-nutritional standards or reduce cafeteria staffing," O'Connell said. "All of these factors can result in longer lines and reduced access to nutritious foods that hurt low-income children the most."

Staff writers Theresa Harrington, Kristofer Noceda, Hilary Costa, Katy Murphy, Eric Kurhi, Neil Gonzales and Linh Tat contributed to this story. Reach Kimberly S. Wetzel at 510-262-2798 or at kwetzel@bayareanewsgroup.com.