School caterers say money shaved from their budgets is subsidising other education costs in England and Wales.
A total of 663 million school meals are served each year
Up to £154m has been saved yearly from school meal budgets since 1994, but the cash has not been spent on improving the catering service, they say.
The savings made equated to 5,500 teaching posts, the Local Authority Caterers Association (LACA) claimed.
The survey found the market was worth almost £1bn a year, with just under three million meals served each day.
And overall sales of school meals were up by 10%.
The LACA survey, based of responses from about two thirds of its 1,000 members in England and Wales, also found many pupils entitled to free school meals were not taking up the opportunity.
In England, 18% of primary pupils did not take up their entitlement, while 27% of secondary pupils declined it. In Wales, nearly a third (32%) of secondary pupils missed out on a free meal.
The research found many schools were doing away with traditional dinner money, preferring cashless payments systems such as smart cards.
And school catering was shown to be rapidly expanding into an all-day service, offering breakfast and an after-school supper, with just under 10% of secondary schools in Wales offering an evening meal.
LACA chairman Vivianne Buller said: "What is worrying is the level of funds that are being haemorrhaged from the school catering service.
Sales of school meals are up by 10%.
"That's over £1bn since 1994 that schools and LEAs are choosing to use to prop up education budgets when the money could have been channelled back into catering to make much needed improvements.
"With criticism about quality so often laid at the door of school caterers, it is ironic that one solution to creating additional funding for this country's school meals service lies within the framework of its own budgeting system."
She told BBC News Online the money could have been spent on increasing food budgets or modernising kitchens and dining facilities.
Nutritional quality issue
Children still ate 90% of their meals at home, so persuading parents to provide more nutritious food was a priority.
But schools could show the way if they could afford better quality meals, she said.
Instead they were being accused of offering pre-packaged "convenience" meals for cost reasons.
A spokesman for the Department for Education said school meals were an important way of targeting and improving children's diets, including those from disadvantaged backgrounds.
"School meals in all maintained schools in England must meet minimum nutritional standards set to allow children to choose healthy and enjoyable school meals," he said.
Vivianne Buller said: "We have tried to meet the government nutrition standards - which frankly aren't that difficult to meet - but to influence parents we ought to be aiming to raise the nutritional quality of school meals."
The policy director of the Soil Association, Peter Melchett, said its own report on school meals, published last year, revealed the
"catastrophic decline" in quality of many primary school meals.
"The LACA report reveals some of the reasons why this has happened."