We have peanut butter only with no jelly - not that it reduces your costs a lot.

But, why is the PTO picking up this cost. I would assume this is an issue with the District/school and they need to address it.

I know laws vary between states and I don't know where you live, but here in PA there is some law that requires the schools to feed kids lunch - money or not - up through fourth grade. When kids run out of money in their lunch account and go three lunches in arrears, they must still be given PB&J sandwiches. Our district does this for students up through 12th grade. Look into your state's guidelines. There's probably something there.

Something else to think about -- are there students (ie. Parents) who are relying on your PTO to give them a free lunch? There could be a need out there that could be met in a better way. Maybe someone needs to be tactfully directed toward the free and reduced lunch program. There may be someone who is, even unknowingly, taking advantage. Look into who is using your PB&J fund most frequently.
I'm also curious about this $300 fund. Do the sandwich recipients pay the money back to the PTO? I like the premise of the program, I'd just like to see how you make it work for you.

I don't understand. Are you a private school? If our PTOs did anything like this I am sure we would have the state on our tails very quickly. In my district the majority of our students qualify for free or reduced lunch. Not all parents fill out these forms because they are embarrassed. They do not realize how it helps with grants and funding. If a child has no money in their lunch account they are not denied food, I am sure there is a law against that, but they are not allowed to charge for extras. Apparently you are within the law in doing this so I would suggest sending home letters explaining the situation. Something like:

Dear Family,

Please remember to send your child lunch money. Due to the large amount of PBJ Sandwiches given out already our funds are dangerously low. If you would like to donate to our PBJ account please send money to so and so.

Help! Our school is out of control. We budget $300.00 a year for PB&J sandwiches. However, this year the kids are being way to careless with not having lunch money. I understand that some of them just forget and others may have parents who just don't care but we have to do something to curtail this now. We have been in school just over 9 weeeks and have gone thru $300.00 already. YIKES!

What do you all do for kids in this situation? We can't let them go hungry and I'm not holding any kid for ransom. I have 6 of my own Thank you.

Thanks for any feedback you can share.