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May 13, 2015

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[M][@][c][K]

I don't know that it is not wholly a good predictor, but there are some unique aspects which will lead to it not being seen as wholly indicative of a general trend.

I take it you watched the YouTube video of the faculty - you want to keep your job - meeting?

anon

Al

There is cutting possible at each law school. However, at some point, such cutting no longer affects only the "fat" but starts to disable the school: that is, render it less capable of delivering.

At the lowest ranked schools, which have already cut much, further decreases in revenue are more or less inevitable (see, above). And these schools are already losing money at a rapid rate.

At these schools, already providing a marginal legal education with little prospect of legal employment, to a low achieving and underqualified student body, how much more "cutting" do you recommend?

Al Brophy

I agree, [M ... K] -- it's a sign, but there are other things going on there.

I did watch the video. I was disappointed with the blame the faculty attitude. (I'm sure that won't surprise anyone here.) If the reports about the founders taking out profits are accurate (and I believe them to be), I don't think this is the fault of the faculty. I wonder if part of what's happening now is that the two founders/owners are thinking that they'd rather shut down than try to carry on, even with a reduced faculty. It's easier for them to stop and not run the risk of losing money even if they could, perhaps, continue with a smaller faculty and break even or perhaps make money this coming year. Moreover, that video looked to me like the statement of people who weren't interested in continuing to look for other solutions. They want a sale to Infilaw or a closure. Still, it won't surprise me if this week we hear one of two things -- either Infilaw will come back and seek to complete the deal. Or the owners will continue to run the school with a reduced faculty. I'm not counting Charleston School of Law out just yet.

Also, anon -- I agree that cutting faculty may be detrimental to the educational mission. No dispute from me about that. My point is that schools can cut expenses (you can reduce faculty salaries without reducing the number of faculty, to a point, for instance) without closing. It's not an all or nothing proposition. Schools have been reducing expenses (even elite schools have eliminated VAPs, for instance -- and some lower ranked schools have reduced pay and some have laid off faculty and staff). I think you'll see more reductions in expenses before closing.

[M][@][c][K]

Al,

Many schools are, notwithstanding cost cutting, still operating in the red. This leads to the host institution question - is this going to turn around in the medium term. I think you need to consider the acute indifference that was displayed to the interest of students allowed by host institutions when they soaked the law schools for money, and indeed raised tuition in 2010-11 as indicative of a more mercenary attitude than law faculty accept (though the good ones teach an awareness of it to students.) Once host institutions recognise that law schools may be a permanent loss making part of the institution, views will likely shift quickly.

As for some of the defences raised by certain law professors, I think anon has a point that many of them are not helping their cause - indeed there is one who is proving very effective at drawing attention to the poor situation at his law school.

anon

Al

I'm trying to follow your logic.

Of course, law schools are capable of "cutting expenses" and many have done just that.

However, you must agree that, at some level of cutting, the law school is less capable of delivering.

Or, do you suppose that the bottom rung (say, the bottom 50) have such deep layers of fat and discretion that they can cut and cut and cut indefinitely without any sacrifice in quality?

These schools are already losing money at a rapid rate. These schools are already providing a marginal legal education that affords little prospect of legal employment, to a low achieving and underqualified student body.

So, I ask again how much more "cutting" do you recommend? Do you suppose that there is no bottom?

Add: simply stating there is always room to cut is really not an answer to the question. That answer simply supposes that there will always be infinite layers of unnecessary "expenses" that can be "cut" without any effect on the legal education delivered.


[M][@][c][K]

Anon:

on cost cutting, I think Al still has a point - though I don't see cost cutting as the only thing this has to happen. There is a bubble in legal education that has two components, scale and cost - too many law graduates who have paid too much for their education. Solving the problem of scale does not solve the problem of cost and its related problem of graduate debt.

My view was, at the peak 2010 state of law schools there probably needed to be a reduction in graduate output of about 1/2 and in tuition of about 1/2. I also think that while law school costs and output will reach "equilibrium," output at least will drop below equilibrium before recovering. However, all of this is based on looking at law schools as a classic bubble and ignoring the impact of the student loan system.

You cannot separate the cost base that law schools have from the liberality and lack of underwriting of the student loan system. When you have the sort of largess that the student loan system represents, costs run out of comtrol. Luxuries become essentials - mock court rooms - oak panelled libraries, thousand dollar lawyers reading lamps (yes I have seen them), armies of administrators, some (not all) ludicrously overpaid professors and deans, etc. Frankly, I think law schools are still very far from looking very hard at costs - and in this respect Al is correct. By the way, on the cost issue, this might apply to all of US higher education - adjunctification may have cut teaching payrolls - but not cost - and there are hard questions as to where the money is going to be answered.

So Al has a point, at many law schools the real, serious cost cutting has not taken place. Can it happen short of closing the school though is another question altogether.

Al Brophy

Anon, I'm not recommending cutting expenditures, but I think it can be done and will be done before schools close altogether. I guess I don't think that's terribly controversial. Will it mean that the schools are less good and less desirable for students? I think so. But right now I'm talking about the question of whether schools will survive. This is a separate question from how much less good the product that they're delivering will be.

Paul Campos

I did a longitudinal budget comparison of two law schools, comparing their operating budgets in fiscal years 1996 and 2012 respectively. Note that this didn't involve delving into some distant past -- by 1996 average law school tuition was double what it had been 20 years earlier in real terms, and faculty-student ratios had fallen drastically from what they were in the 1970s. In other words, by the mid-90s, the per-student operating costs of law schools were already vastly higher than they had been in the 1970s (and they were a good deal higher in the 1970s than they were 20 years before that).

The two law schools were a hyper-elite institution and a state flagship consistently ranked in the 30s and 40s. Hyper-elite went from spending $49.8K per year per student in FY1996 (in 2012 dollars), to spending $101.9K per student in FY2012. State flagship went from spending $25.5K in FY96 to $51.5K in FY12 (again in 2012 dollars).

At both schools, by far the biggest driver of increased cost was an extraordinary increase in the number employees (faculty, administration, and support staff).

Whether these increases in expenditure led to improvements in the educational experiences of the respective student bodies at the schools is not known.

BTW, the idea that graduates of low-ranked schools don't get jobs because of the purportedly low quality of the legal education they receive is as implausible as the idea that the graduates of high-ranked schools get jobs because of the purportedly high quality of the legal education they receive.

Just saying...

Paul is correct in terms of his last paragraph and the fact that at all law schools, personnel costs, especially faculty costs, are by very, very far, the largest component of the budget. Like universities, law schools have added types of employees that did not exist in decades past: IT, financial aid counselors, remedial writing/skills staff, specialized librarians (foreign/comparative, electronic resources), even mental health/wellness professionals. They have also increased the size of faculty, in part, to satisfy the ABA's arbitrary student:faculty ratio. Most especially, they have paid faculty and many administrators way more than they have had to to attract them.

When it comes to faculty/deans salaries, I am always reminded of Mario Cuomo's line when NYS states judges were asking for a raise arguing that the state would not attract good judges if it did not. He said, "I have a list as long as my arm of people who would step over their mother to get a judgeship now."

Same for law faculty. Many would have undoubtedly taken the job to escape practice and other reasons for much less money.

Still, law schools seem to be just cutting -- not re-imagining -- some that I am aware of have cut though buyouts, which have resulted in very lopsided personnel departures leaving them very understaffed in certain areas and still with top-earners in place. Lots of the lower paid people can leave because they are more employable.

(M)([a)(c)(K)

On the scale issue - Al - you are a professor at UNC. North Carolina has no less than seven ABA accredited law schools with something of the order of 4800 students enrolled and around 1600 graduate per annum - how is that sustainable? Immediately adding North Carolina is Virginia with nine law schools effectively competing in the same regional market; Tennessee with six and Georgia with another six - and Charleston is just across the border. Do you really think this scale is sustainable - thirty odd law schools in the same regional submarket? Most observers would describe it as utterly insane, ludicrous.

Do the Carolinas need Charleston Law? Can South Carolina support Charlotte, Elon, Campbell (aka Wiggins) and Carolina Central? Charlotte (Inflaw) has 1200+ students enrolled, 400+ graduate a year with awful employment outcomes and sky high tuition. Does North Carolina need this school - the market is saying no. Elon, terrible employment outcomes, tuition is pretty hefty - again is the market not saying we don;t need Elon? Cambell - which this year raised for the 4th year running its tuition by 4% plus despite terrible employment numbers - doe North Carolina need this place? Transparently Campbell cannot be cutting costs - because it it was, why has it needed to raise it situation by 5%, 4.2%, 4.9% and 4.3% year on year since 2010?

Seriously Al - you are a professor at UNC - it and Duke will survive - you have nothing to lose. Why can you not say the hard reality - there are 3-4 law schools in North Carolina that should be closed - tomorrow. Can anyone defend the ongoing existence of Charlotte, Elon and Campbell? Can you give any good reason these institutions should continue to exist?

anon

Al and Paul

I quite agree that lower ranked schools do not fail to place the majority of their graduates in legal employment because of cost cutting. However, the lower the "qualifications" of the student body, the more resources are needed.

We all, I suppose, know that law school classroom is already filled with some who are getting it, and a sizable contingent who need "extra help" : and this is true at every law school.

But, when you are thinking about a law school that is focusing in admission on the bottom quartile of LSAT takers, what are your options for cutting? What will you cut?

And, after the law school has been generating losses, year after year after year, how much cutting is still possible without affecting the needs of the students?

Al, you seem to agree that at some point, such cutting will affect the "quality" of the education delivered, but survival will still be possible.

Is that the sole goal here? Survival? When there are too many law schools, and everyone knows it?

What is the prime value here? Maintaining the current number and d... the consequences?

Should we maintain fifty law schools that each enroll fifty persons per year who have scored in the bottom quartile of LSAT scores, with 50 tenured faculty richly paid at each school and nothing much more than that? Is that a school that should be preserved because there is always "more to cut"? Even if the school charges 45K per year and places 20% of its grads in FT, LT, JDR employment?

This this is wild hyperbole? We already see some schools where the number of faculty is approaching a one to one ratio with the students: often these are the lowest performing faculty members too boot, who cling to cushy perches ever more tightly while demanding ever more concessions and rewards to leave. We all know this is true, so let's not posture.

These are decidedly NOT the faculty who will work diligently and at the level necessary to rescue the ever increasing number of students who are failing: students who began law school underqualified and underprepared, who will graduate with a slim chance of obtaining legal employment after spending enormous amounts of money to obtain a diploma that won't get them the job they "trained" for. These are most often the faculty who are producing no scholarship of any value, while claiming that scholarship is an excuse to teach 6 or fewer units per semester, take long sabbaticals, demand "summer stipends" to do what they are supposed to do anyway, take expensive vacations justified with a short attendance at an ever so important "conference," run "foreign study" programs to live abroad high on the hog, create phony and ever more ridiculous sounding titles to justify increased compensation, etc. etc. etc.

Sure, these "expense" can be cut: they have been at many of the underperforming schools, though, perhaps not enough. Now what? Do you really think there is no point where cutting must and will stop?

We are failing, all of us, if we allow this to persist.

Is this circumstance worth preserving at all "costs"???? Where should the line be drawn?

We started here with the notion that "cutting expenses" can save all or nearly all law schools? Is that the correct stance?

Just saying...

anon and others: Expecting law schools to truly reform themselves and vote to close for the greater good id futile. The only hope is that university admins will do it for them or changes in federal loan regs will result in it.

Al Brophy

[M...K], you're moving the discussion in a different direction. My point is that schools can, have, and will shrink costs in order to survive. I hardly think that's controversial.

One your new point, do we have more law schools than we "need," however that's defined? Perhaps. One response, though, will be for schools to shrink enrollment. That's already happening. It may very well be that we do need -- or will benefit from -- small enrollment schools in many different cities rather than a few larger enrollment schools in a few cities. I imagine there are a lot of people who for family and work reasons can't leave Charleston. They benefit from having CSOL and I suspect that the community benefits from this, too. I bet that's true for Elon in Greensboro, Campbell in Raleigh, Charlotte, and so on. If the market decides that the schools need to be much smaller, they'll get much smaller.

Are there too many law graduates now? Perhaps. Though we're going to see smaller numbers of grads for a few years at least. What should the response be from regulators? Shut down schools down solely because they're producing graduates (that is, independent of any questions about bar results)? That's a level of government regulation that a lot of people won't be comfortable with. There's a lot more to say about this, obviously. When we hear more about the decision of CSOLs owners later this week, perhaps we can continue the conversation.

confused by your post

One would think that even a modest increase in required teaching loads (say 1 additional class per year) would go a long way toward fixing much of the expense side of schools' financial statements. In response some professors would leave for schools with lower teaching loads and some would retire a bit early.

You just don't hear much on the subject so I get the impression that schools are not increasing teaching loads. Are the issues created by trying to impose a modest teaching load increase such that schools aren't even considering it as an option? Or is it actually happening and just not openly discussed?

anon

"What should the response be from regulators? Shut down schools down solely because they're producing graduates (that is, independent of any questions about bar results)?"

No, shut down schools that produce graduates with an 80% chance of being UNABLE to obtain the employment for which they paid dearly to train (even if they pass the bar - adding attrition rates and bar failures is already quite alarming: where is the ABA?). Shut down schools that can't attract students who are not, in the main, in the bottom quintile on the LSAT.

The fact that the ABA ignores enforcement of any "standards" is a disgrace: plain and simple. Name the enforcement actions by the ABA in the past ten years that have had any teeth. Is it your view that NO ENFORCEMENT is the correct stance, or, do you believe that every ABA accredited law school in the United States is adhering to the (admittedly vague, weak and diluted) ABA standards?

"That's a level of government regulation that a lot of people won't be comfortable with."

No, actually, it has nothing to do with government regulation. This is a matter of ABA accreditation (recognizing that student loan money will dry up if that accreditation is withdrawn).

(M)([a)(c)(K)

But Al, when you ask can law schools shrink costs to survive that inevitably leads to the question - "costs per student." If law schools shrink their fixed overheads (tenured professors, buildings, etc.) need to be shared over a shrinking number of paying students. If Law Schools increase teaching loads for professors - while shrinking enrolment, this again does not "fix" the problem. It is a vicious circle.

Turning to the question your raised: "What should the response be from regulators? Shut down schools down solely because they're producing graduates (that is, independent of any questions about bar results)? That's a level of government regulation that a lot of people won't be comfortable with."

Think about this for a moment - government is subsidising law schools massively through the student loan system. Most of these law schools would have closed years ago without it. What you are arguing is that the Federal Government cannot regulate that which it subsidises. Remember the dusty answer Justice Jackson for this argument in Wickard v. Filburn, 317 U.S. 111 (1942):

"It is hardly lack of due process for the Government to regulate that which it subsidises." Interestingly the subsidy in question was in the form of Federal Government loans - and Filburn had, through the government program been able to double the price he received for his wheat, just as law schools.....Jackson was right then.

Al Brophy

anon, too much to talk about here in the comments that began as a discussion of how many law schools will shut down (or whether they can get costs into alignment, or something along those lines). My point, which I think most people here have accepted as correct, was that law schools can and will get costs into alignment and thus will continue to operate. I understand that a lot of people who comment here want schools to either shut down or, apparently more likely, to be shut down. That wish is separate from what seems to be happening -- that fewer people are going to law school in response to the poor job outcomes and that schools are responding by making cuts to expenditures.

Maybe the federal government should tighten standards for student loans and maybe the ABA (and hence the state bars that rely on its accreditation) should tighten their standards. Or maybe the state bars should just raise standards on their own by increasing the score necessary to pass the bar. All that's part of a huge discussion about opportunities and regulation that is beyond what I'm prepared to discuss in these comments. I'm focused on trying to read what's happening in law schools and make a prediction about the near and medium term future.

anon

Al

It is unlike you to resort to questioning others' motives ("I understand that a lot of people who comment here want schools to either shut down or, apparently more likely, to be shut down.")

What "people want" is some normative guidance about the standards that should be upheld when there is talk of "cutting expenses" to "survive": where the survival value seems to be asserted in response and trump everything else.

You have declined to state whether there is a bottom in terms of such cutting. You have not answered whether, when such cutting negatively affects the delivery of the law schools' mission (an outcome you acknowledge), a law school should close.

Perhaps you "want" every law school now open to stay open no matter what. But, to question your motives or feelings or whatever has nothing to do with the logic of your stated observations.

Why not just acknowledge that there isn't an infinite amount of "expenses" that can be "cut" and that, at some point, closure is the acceptable and perhaps preferable alternative?

[M][@][c][K]

"I understand that a lot of people who comment here want schools to either shut down or, apparently more likely, to be shut down."

Al I think you are distorting the point, and frankly being snide while doing it. I am asking you, bluntly - tell us what good Charleston and Elon are doing their students. No one in Charleston even wants to hire Charleston graduates - they are being loaded up with debt to benefit Inflaw. Show the courage to actually address that rather than make insinuations about people's motivations.

I want you to give straight answers - what purpose do these schools serve other than to enrich a few local residential landlords, burger shops and salary a few professors. Are they doing anything for their students. All you do is dodge and weave. It is a fair question - you are a law professor at the State University who comments on law school economics quite freely. Why not answer the question - can the existence of these institutions be justified in any rationale terms other than a bunch of third-party-beneficiaries that are not the the students want them to continue?

UNC is not going to close its law school, neither is Duke - so why not answer the question? Are you that worried by what the great conspiracy theorist might say - the defenestrated philosopher?

Orin Kerr

I'm no expert in law school budgets, so I apologize if I am missing something, but I'm not sure about what baseline we're using when we talk about university-affiliated law schools "operating in the red."

I'm confused about the baseline because, as I understand things, university-affiliated law schools generally have some sort of ongoing financial arrangement with the university. For example, let's say a university has an arrangement with the law school that -- in exchange for the law school's buildings, heat/power/water/maintenance etc., and the value of the association with the university and access to its benefits -- the law school has to pay the university X million per year. In past years, the law school may have been considered a "cash cow" in the sense that X million was more than the building and maintenance would generally be worth.

From what I hear, when the applicant numbers dropped, a lot of law school Deans went to the main university and asked for a temporary break. I imagine the conversations going something like this. "We really need to cut class sizes to help maintain quality," the Deans explained. "But because doing that will cause a budgetary shortfall of Y million dollars -- after we pay the university its annual take of X million dollars -- we're hoping the main university can cover the difference just for a few years until application numbers stabilize." So the Presidents at a lot of schools apparently agreed to only require the law school to pay X-Y million dollars for a a few years. As I understand things, (X-Y) is still a positive number: The law school is usually still making a large payment to the university. But it is a smaller payment than it was before.

My question is, when we're talking about law schools being "in the red," are we using the baseline of assumed payment X, assumed payment X-Y, or something else? The reason I ask that is that depending on the values of X and Y, law schools may be operating "in the red" in one sense but still be making large payments to the university. Even assuming that universities act like for-profit businesses and cut programs when they lose money -- which might happen in some cases, but isn't the norm -- they presumably won't be eager to shut down law schools that are in the red only in the sense that they are making smaller payments than before.

Granted, I suspect that a lot of universities will want to keep the breaks temporary, so many schools will have to go back to paying the full X soon. And depending on the school, that will require belt-tightening, efforts to restore prior class sizes, or other options. But I'm not sure what the baseline is we're using for being "in the red." Or at least that's my question, which I hope others can explain.

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