Vermont Law School announced yesterday that it would be offering “buyouts” to staff (and possibly, faculty) in an attempt to weather the sharp drop in law school applicants and LSAT takers and a $3.3 million budget shortfall. As a stand-alone institution, VLS perceives itself (and rightfully so) as more vulnerable to these market shifts than university-affiliated law schools.
Other media outlets (and blawgs) have devoted ample space to the “crisis,” so I won’t repeat these arguments here. I will note, though, that the idea of “buyouts” for faculty is an interesting (and potentially troublesome) one. Universities have been offering tenure buyouts for years – public institutions, especially, have seen their budgets slashed by state legislatures desperate over shortfalls not unlike the one facing VLS. Buyouts are not without controversy – for example, tenure rules frequently limit the types of buyouts that can be offered (and to whom such buyouts can be extended). Moreover, schools must be careful with their doomsday predictions when making buyout offers. Case in point: Whittier offered buyouts to certain tenured law faculty back in 2007 and found itself on the receiving end of a lawsuit; faculty claimed that the school’s representations regarding frozen salaries and 50% increases in courseloads (in the event that the buyouts were not agreed to) were fraudulent. Whittier had offered the buyouts on the heels of the ABA putting the school on probation; after students’ bar exam pass rates improved, the school took steps to raise faculty salaries and maintain existing faculty workloads.
It remains to be seen whether Vermont is headed toward faculty buyouts, but if this is a sign of a trend, we should all be paying close attention (at every level). What is tenure worth? Can it be assigned a dollar value? Is there some idiosyncratic or personal value attached to this form of property (see my earlier post on personality theory)? Is it fungible? Can partner buyouts at underperforming law firms be a model for these initiatives? I look forward to your thoughts on this.
Partner buyouts are no model because the "buyouts" are mostly, if not exclusively, a return of the partners' capital.
Posted by: Doug Richmond | November 27, 2012 at 08:46 AM
Is bankruptcy reorganization a possible model for law schools unable to pay creditors?
Posted by: TS | November 27, 2012 at 11:33 AM
Bobby Dexter of Chapman Law (bio at http://www.chapman.edu/our-faculty/bobby-dexter) published an article in the Pitt. L. Rev. on the taxation perils of tenure “buyouts,” and whether such payments should be categorized as wages (or other income) for payroll tax purposes. The article describes a circuit split over whether a buyout represents payment for services already rendered (like a wage) or consideration for an agreement to relinquish one’s position in the academy. Thanks, Bobby, for the hat tip on this interesting angle! Article link at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1463067
Posted by: Taja-Nia Henderson | November 27, 2012 at 11:47 AM
The only people I've known to take buyouts were at or near retirement age. These are folks who would have retired in a few years anyway and it is unclear that the school saved very much money at all by paying them, say 1.5-2x their current salary to leave. Unclear because most of the people I know who've taken buyouts would have left in 1-3 years anyway.
Posted by: MattB | November 28, 2012 at 10:13 AM