LSAC Data and Predicting Number of Applicants for Fall 2015, Part 17

I am just blown away by the fact that 8% of the applicants in this year's class will come from beyond May 8.

So let's assume that the current trend (of slowing declines) is going to continue. This year there will be about 2.5% fewer applicants. Next year let's say 1.8% fewer, 1.2% after that, then 0.6% down, and four years out it stabilizes.

Those lost numbers aren't going to be evenly distributed among schools. How many schools can afford to lose, over the next 2-4 years, another 10-15% of their classes?

Derek

To go one step further, assuming the top 100 enroll about 20, 000 students, what will the LSAT profile of the lower 100 schools be? The lowest 25 schools?

And, to advance the question one further step: What will S have to say about the employment/earnings prospects of graduates of law schools that enroll a majority of persons whose scores were in the lowest quintile on the LSAT?

MILLION DOLLAR PREMIUM TO EVERY ONE OF THEM, FOLKS!

ENROLL NOW, BEST TIME IN HISTORY!!!

The headline elsewhere will be: LAW SCHOOLS ENROLLMENT UP AND NEARLY FULLY RECOVERED FROM POST 2008 LOWS

"I am just blown away by the fact that 8% of the applicants in this year's class will come from beyond May 8."

Law school marketing departments are on the job!

It would be amusing to see the volume of solicitations any moderately qualified student gets who has expressed any interest in law school.

"Those lost numbers aren't going to be evenly distributed among schools. How many schools can afford to lose, over the next 2-4 years, another 10-15% of their classes?"

Very true statement. Ironically, the schools hit the hardest may be those in the US News 15-50 given that applicants in 160-170 range are still declining at a rate of about 7% annually. If these schools want to keep their LSAT profiles, they will have to reduce class size big time, and probably shell out big scholarship dollars too.

Well, it looks like there will be a few less seats to fill with new 1L's this Fall judging from the Youtube video I just watched. A cell phone video of last week's "meeting" between owners/adminstrators and Charleson SOL's faculty.

https://www.youtube.com/watch?v=zlJxfOJFvao&feature=youtu.be

Gotta love the msg to the faculty at the meeting. If the faculty don't want to lose their jobs they must personally appeal to Infilaw and tell it that faculty won't make any trouble. Beg Infilaw to reconsider buying Charleston and paying the owners millions. It's Infilaw or death.

The man who signs the pay checks should be the one to sign the pink slips. – Ned

When you play the game of law schools, you fill seats or you're fired. – Cersei

Did you 'ear that? The school's too fat to fit in its budget. Go, run and find the admissions standards stretcher! – Robert

Any school that must say 'I am a law school' is no true law school. – Tywin

Fewer. There are fewer seats to fill. – Stannis

[Spoilers Ahead]

For the employment stats! – Olly

Winter is coming.

Posted by: Derek Tokaz: "Those lost numbers aren't going to be evenly distributed among schools. How many schools can afford to lose, over the next 2-4 years, another 10-15% of their classes?"

And a substantial percentage of their tuition?

If they have to discount another 20% to get 'only' a 15% decline, that's a gross revenue adjustment of: 0.8*0.85 = 68% of where they are now. Paul Campos has made some back of the envelope calculations to guesstimate that a third or more of law schools are now in the red.

Knock off another 32%, and the number in the red might outnumber the ones in the black.

Barry, you way underestimate the number in the red. One law school dean said to me just the other day that he thinks all but a small handful are running a deficit. This is consistent with what other deans have said to me. It is also consistent with Kent Syverud said publicly a year or two ago.

In terms of survivability it's not just a matter of numbers; law schools attached to selective universities are not going to let admissions standards get too lax and risk their brand name.

@twbb, you raise an important question: how much can law schools attached to selective universities drop their admissions standards. I think central administrations aren't very sensitive to the kinds of fine distinctions that people here in the faculty lounge (and elsewhere in the law school world) draw about student (and faculty) quality. I'd be interested in your — and other people's — thoughts on this.

twbb, Al, Barry, Kyle:

It seems that to work out what is going to happen you need to put yourself in the shoes of a University or College President and his/her board. In doing so it is worth considering that as a group they tend to be ruthless – and that in many instances law schools have been established less as “prestige” addendums to the university and more as simple “cash cows.”

So start with the “prestige” rationale for having a law school – that to some degree depends on the law school being “prestigious.” If the law school has falling admission criteria, controversial employment outcomes, and is less prestigious than the institution as a whole, or a number of its other graduate schools, then the prestige rationale is in trouble. There are quite a few law schools whose rankings and prestige are “upside-down” vis-à-vis their host institutions.

Then consider the “cash cow” status of the law school. It is a pretty open secret that parent institutions have been milking the law school tuition pretty hard for a couple of decades. Two stories that revealed that reality were savage budget cuts at Catholic University due to the decline in tuition revenue from the law school since 2010 and the resignation of Philip Closius University of Baltimore School of Law over the efforts of the University to continue or even increase its extraction 45% of the law school’s tuition revenue.

We are now in a situation where very few law schools are running the sort of surpluses that allowed for the rake-off than their host institutions expected (and remember the ABA allowed at least 20% (and creative accounting it would seem allowed for more to be grabbed.)) Instead, law schools are operating in the red at many colleges and universities. So the question is how long will these host institutions tolerate a loss-making law school?

Returning the our hypothetical University or College President and his/her board, that question really comes down to “will this situation change?” Will there be an upturn in revenue due to rising tuition, falling discounting or falling costs. However, there is a constant tension between these factors – cutting costs runs the risk of a reduced reputation, as does cutting discounting for students with high LSAT/GPAs, which in turn leads back to discounting, etc. It is a vicious circle. They have to be thinking “the law schools has been arguing that the 'end is in sight' for enrollment and tuition declines for several years now – but are they materializing and when will things turn up?” Credibility must be running out.

I have long predicted that closing law schools will be a “wave” that will be triggered by the first few law schools hosted by serious colleges or universities unambiguously closing their doors. That by the way not be Charleston School of Law or any of the Inflaw schools, who can be characterized as dramatically dysfunctional and sui generis. It will be more mainstream institution. But I think the day is close.

Thanks for this, [M … K]. I suspect that many (perhaps most) law schools add prestige even if they are upside down as to ranking vis a vi the home institution. Maybe I'm wrong about this, but I don't think prospective students (other than law students) and alumni and administrators in the central administration are as sensitive to rankings as those of us who work in schools (or graduated from them) may be. To carry this out some more, I have a vague sense that the medical and dental schools at UNC are really well-regarded, and the history and English departments, too. But I know very little about three of those four.

Sure, rankings are trotted out periodically, but I have very serious question how much central administrations know (or care) about the quality of law schools. And I've been saying to people in conversations about law school closings for a long time — this isn't an issue of continue spending at the current (and presumably unsustainable level) or close. There are a lot of steps that schools can (and I suspect will) take before closing, such as cutting faculty size and salaries. We've already seen dramatic declines in replacement of faculty; buyouts at some schools and outright layoffs at others. There's room for more of this before schools need to close. I think central administrations will be reluctant to close schools entirely because of the prestige of having a law school; because of entrenched interests from alumni to the community; because a law school can be a marketing tool for undergraduates; because success as an administrator is often seen as expanding a school, certainly not in contracting. There may be some schools closing; I'd expect that there will be. But I'll be surprised if it's going to be a lot and I suspect few if any will be those above what US News used to call the fourth tier (or what are now called the unranked schools). At any rate, time will tell.

I don't think any law schools are in imminent danger of closing, though I don't think it's outside the realm of possibility for a number of law schools attached to relatively prestigious undergraduate universities. Supposedly, one of the factors behind the closure of dental schools in the 1980's-through-00's was that the drop in applicants meant dental schools were getting much less selective, and the universities had a problem with that. And these tended to be at schools with fairly elite undergrad programs like Georgetown and Northwestern.

In the modern era it seems even more likely; one of the impacts of corporatization of the modern university is a greater focus on things like "strategic missions" and "branding," and it seems that every college around has spent the past decade trying to fight its way up the prestige totem pole. That doesn't necessarily mean that central administration is focused on the minutiae of USNWR ranking oscillations year-to-year, but I do think they will notice when their law schools are admitting students with median LSATs 6 or 7 points lower than they were a few years ago, or if the USNWR reports show a significant rankings drop over several years. That reduction in selectivity basically creates a fundamentally different student body, and I think that will start to become noticeable.

Now obviously there's a reputational hit these schools would take from having to close a school that has to be taken into account, and the potential financial hit of dealing with the inevitable lawsuits from aggrieved law faculty, but in the end those universities are going to do what they think benefits the university as a whole. And I don't think faculty senates are going to be too sympathetic considering the typical pay and work disparity between law professors and other disciplines. When law schools were subsidizing the university as a whole that was one thing, but now that this has vanished a lot of places I think the political capital of the law school administration and faculty has dwindled significantly, and law schools tend to have shockingly large faculties; as a law student I remember looking at the faculty directory and seeing a large number of full-time professors I had neither taken nor even heard of.

"And I don't think faculty senates are going to be too sympathetic considering the typical pay and work disparity between law professors and other disciplines. When law schools were subsidizing the university as a whole that was one thing, but now that this has vanished a lot of places I think the political capital of the law school administration and faculty has dwindled significantly"

This is key. The politics will be what does schools in, I believe.

Al,

I take it though that you agree that Charleston would not be seen as a bellwether – that, rightly or not, if it closes as seems likely, it will be distinguished in various ways by many commentators.

twbb and Kyle have it right.

It would be error, perhaps, to assume that the arguments propounded by law faculty members, here in the FL and in other like settings, have had no negative effects on the perception of legal academia, and thus, law schools in general.

Every prickly, undertrained/underqualified and biased exercise in dilettantism used to support the status quo in legal academia, and every bit of praise heaped upon such efforts by some with a vested interest in the outcome, reinforces the conclusion that some things are very, very wrong with the law school ethos.

Once this perception sets in (and it has already) the vain, self interested arguments put forth to stave off the inevitable sound increasingly feeble.

We have the same applicant base that existed long before fifty or so more enterprises rose up to feed at the federally supported trough. Law schools rapaciously jacked up tuition, even at the schools most assuredly at the bottom of the barrel, with reckless abandon.

What justification exists now for those bottom feeders to continue? As admission standards sink, the "opportunity school" rationale disappears.

Let the culling begin, and let it begin where it should: from the bottom up.

I think you're exactly right, [M … K]. The situation at Charleston isn't a good predictor of what's going to happen (or is happening) at most other schools.

(I guess I'd add that I'm a little surprised that Charleston isn't doing what I've said other schools have done and are going to do — which is to cut more expenses before closing.)

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?

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?

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.

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.

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.

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.

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.

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.

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.

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?

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?

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.

[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.

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?

"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).

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.

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.

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?

"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?

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.

Hi anon, I think the desires of commenters for law schools to close is affecting their judgment on whether schools will close. Not necessarily impugning motives, but I think wishes affected predictions here. That's a pretty common character trait. I know that affects my judgment on occasion, too.

At some point I'd like to speak to when law schools should close. I think there is a place for what I have taken to calling Micro law schools, which have small student bodies and small or maybe even tiny full-time faculties. At any rate I think that's a direction we're headed before we see outright closures. Maybe that's just a stage schools will pass through on the way to closing. Or maybe that'll be a more permanent state of existence for some schools.

Thanks for participating in this discussion and for encouraging me to think about some issues beyond whether schools *will* close. I hope you have a good remainder of the weekend.

Orin:

It is more complex than that. There are two ways in which host institutions take money from the law schools. First, the ABA allows the host institution to extract a proportion of tuition revenue from the law school – a straight tax so to speak. It is suggested that this number is about 20% of revenue. Second, the host institution can charge the law school for "shared services," which is obviously more feasible if the law school shares facilities with the host institution – is contiguously located. That can amount to another substantial percentage, but this is justified as a "cost" item. Here as I think you point out there is a lot of room for dubious accounting for costs, overhead, etc. How much the universities were pulling out of law schools is hotly debated – but it was widely said that in 2011 the University of Baltimore was managing to extract 45% of tuition revenue, while the budget cuts at Catholic suggest that it was very dependent on its cut of the law school's revenues.

That was the history – the law schools contributed to the bottom line because they were very profitable – and the hosts were taking is is suggested between 20%-45% of revenue. What is now being said is that revenue has dropped to the point that many law schools are no longer contributing and are seeking subsidy. So when it is being said that law schools are operating in the red, what is being suggested is that their costs – all in are not being met by tuition and they are bordering on, or beginning to seek help from the host institution. In short they are now loss-making.

How many law schools are in this situation – not all, but it is certainly not a non-trivial number. In that respect Charleston School of Law is interesting – because it was able to build up a reserve of $25 million in its early years of operation – that the 5 shareholders raided to pay themselves a dividend, but now is in deficit and seeking rescue (i.e., the profits have vanished.) Thomas Jefferson's recent sale and leaseback of its building was similarly designed to deal with a reality of a law school operating at a loss. The question is how many other law schools are now losing money – real hard cash – to keep the doors open – and how long will their host institutions support such losses.

Orin:

To the foregoing I'd add that, to the extent that law schools were overcharged for shared services, they were of course subsidising the host institution, while departments charged less were not.

If you take a look at the accounting and granting documents for STEM research grants, both from government and from the private sector (I have) you will notice that they always cap what the host institutions can take out in overhead and charges for shared services, office space, etc. It seems that science foundations are wise to that game.

All: In terms of are law schools in the red on their own or because of the cut given to the parent organization, I can tell you from direct experience on site teams to a number of lower ranked schools in recent years, they are in the red all by themselves and that many universities are not only foregoing any contribution, some are funneling money to the law school to keep it afloat. This will not continue forever; some of these universities are not in great shape, but no one wants to be the first to close what is often the most prestigious school it has.

I am always puzzled by the way in which many faculty members reacted to the fact that the law school have to pay something to the parent institution. Most law schools trade off the name/rep/brand of the parent to succeed, all would not exist without the parent founding them. I would ask them: Why shouldn't they pay a % to the university, since all the resources of that university from the main library to the faculty dining room are available to them?

In terms of wanting to see some law schools close — well, of course!! As a member of this profession, I have come to see how the over abundance of law schools has almost destroyed it, as well as the lives of many recent and current students. This cannot be disputed.

Anyone who answers "perhaps" to the question of whether there are too many law schools is living in some alternate universe.

Faculty dining room? What is that?

I was not referring to a law school faculty dining room, but the university faculty dining room, which still exists at many, many institutions.

Al

"Thanks for participating in this discussion and for encouraging me to think about some issues beyond whether schools *will* close."

You're welcome. But, I think you would agree that it took too many attempts to simply acknowledge that you were dodging the "should" question. THis was troubling, because you sort of casually acknowledged that your "observation" that law schools would keep cutting and cutting to survive might put in jeopardy the delivery of the program.

Thus, it still is a mystery that you stick to your "it's what you wish" meme. That is beneath you, because it is not usually your style to be patronizing and condescending.

One can only conclude that it is YOUR wish fulfillment that not a single law school close, EVER, lest some dam break and all h… break lose. I would ordinarily refrain from referring to my inference of your motivation, but, because you insist upon button holing every argument by mischaracterizing the motives of the speaker, I'll engage by properly (I believe) characterizing yours.

I suspect you will now close the comments.

Al, just sayin –

Not a rhetorical question, but one I think you need to answer – what is the mission and purpose of a law school in your opinion?

Orin, A commenter at Conglomerate explained it this way:

All law schools that are part of a larger university (the bulk of those that make up the ABA accredited schools) pay a “tax” to their universities. These range from 20-40% of top line revenue.

Conservatively, over the last 20 years the typical law school likely paid more than $100 mn to their parent institution. Some likely paid a lot more than that. Of course, some of that cash flow went to keep the lights on in the law school buildings but I am willing to bet that a substantial amount was free cash flow to the university.

Now many of those same law schools are running at an operating deficit, meaning that each year their incoming revenues (largely tuition) are not enough to cover costs. Some substantial pruning is underway in the form of faculty buyouts, staff layoffs, hiring freezes, taking away coffee in the break rooms but let’s assume that even with all of that there is a deficit.

But remember that’s an operating deficit. It’s calculated after the tax to the university. So on an actual cash flow basis if one builds back in some portion of the tax off the top line, most of those same law schools are cash flow positive. And this is true at the worst part of the downturn as enrollment has pretty much fallen likely as far as it is going to fall.

Now, it’s conceivable that this downturn will be an exception to the many previous downturns and turn out to be a permanent “new normal”. But if it follows the pattern of the last thirty years enrollment will likely bottom out this year and next and soon begin to turn modestly upward.

So at this point does it make any sense for the trustees or regents or whatever of a university to shut down a business unit that has generated tens of millions of dollars for the university? Frankly, it would not just be shortsighted at this point, it would likely border on a breach of their fiduciary duty. Given past history and the evidence of an improving market and wider economy it would take another two-three years of sitting at the current trough or at least one-two years of significant declines to provide a basis for any claim that a law school should be
shut down.

Of course, this analysis does not apply to stand alone law schools, the for-profits, etc.

"evidence of an improving market and wider economy it would take another two-three years of sitting at the current trough or at least one-two years of significant declines to provide a basis for any claim that a law school should be
shut down."

And the "evidence" is what, exactly? Improving market for what? Law graduates? Improving "wider economy"? Where? "two or three years … or at least one-two years …" What is the basis for these bullfeathers? This is FL nonsense posing as a reasoned analysis: but it is based, as usual, on nothing.

And, BTW, one would love to know the source of the speculation about the "red" and "black" issues: we are told the source is a " commenter at Conglomerate." Once again, this passes as "fact" in the FL, but it is really quite specious to so assert based on mainly nothing.