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What’s going on at Suffolk?

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Just days before the start of the new school year, Suffolk University Wednesday abruptly replaced president James McCarthy with a year remaining on his contract, and tapped a veteran educator with a reputation for turning around struggling colleges to serve as interim leader.

At an afternoon meeting, the university’s board of trustees voted unanimously to appoint Norman R. Smith, 68, who is best known for his tenure at Wagner College in New York City, where he led a small school on the brink of closing to new prominence.

Smith, who will begin next week, said he was first approached about the Suffolk position just two weeks ago.

“This has happened very fast,” he said. “They didn’t want to go internally, but wanted to have a seamless start for the fall.”

The law school seems to be at the center of the school’s financial problems:

The unexpected change in leadership comes as Suffolk seeks to stabilize its finances and attract students in the college-dense region. Facing a decline in enrollment and revenue, the university announced in June it would freeze employee salaries for the next fiscal year. It also offered buyouts to all law school faculty members with tenure or renewable long-term contracts.

Unfortunately the university’s most recent publicly available tax filings are now two years old, but they reveal a heavily tuition-dependent school with a small endowment and very large bond liabilities (I assume the latter are products of the typical grandiose building schemes that have infested the American higher ed empire over the course of the last generation).

In FY2012 Suffolk was carrying nearly $400,000,000 in debt, versus total assets of just over $600,000,000, half of which were comprised of the downtown Boston real estate which the school currently occupies. Almost 95% of the school’s revenue came from tuition. The school paid its former president David Sargent — his presidential tenure was from 1989 through 2010 — just under $1.2 million in FY2012, which seems like a very prolonged and passionate golden handshake. Sargent began his “academic” career as a member of Suffolk law school faculty, and eventually became the school’s dean. The law school’s then-new building was named after him in 1999 in the midst of his reign, which seems rather tacky, but I’m probably failing to appreciate what a “transformative” figure he was etc. etc. (Actually he appears to have been forced out in 2010, after much outcry over his increasingly grotesque compensation packages).

Speaking of the law school, the striking news that the university has offered buyouts to all of its tenured faculty raises some questions regarding the school’s financial status. Suffolk Law by itself generates about one fifth of the university’s total tuition revenue. Recall that tuition revenue makes up almost all of the university’s operating income, so the if the law school catches a cold the larger institution may soon develop pneumonia.

What’s the impetus for trying to seriously downsize the law faculty? Is the law school losing money, or not making enough surplus income for the university? I’ve calculated how much net tuition revenue the law school cranked out in FY2013 per full-time faculty member:

Full time sticker tuition: $24.8 million
Full time discounted tuition: $15.7 million
Part time sticker tuition: $12.6 million
Part time discounted tuition: $4.4 million
Total JD tuition revenue: $57.5 million
Non JD tuition revenue: $1.3 million
Total tuition revenue: $58.8 million
Total tuition revenue per full-time faculty member: $632,258

Note this isn’t the law school’s total revenue, as it omits endowment income, annual gifts, grants and contracts, rentals etc. Let’s assume all of the latter comprise only 5% of the law school’s total revenue (frankly it probably isn’t much higher than that). That would mean the school was generating around $670,000 in annual revenue per full-time faculty member in FY2013 (the school’s dozens of adjuncts are of course paid next to nothing — probably a few hundred thousand dollars collectively).

It’s hard to believe the law school can’t generate some surplus income for the university on the basis of those figures, despite the inevitable existence of various Assistant Vice Deans For Achieving Bureaucratic Rectitude, paying the debt on the school’s fancy relatively new digs, and so forth. On the other hand, the law school is dealing with plunging demand: while class sizes have yet to be much affected, the school has moved from a mildly selective to a quasi-open admissions model. In 2004 the school admitted 40% of its applicants; last year that figure was 77%, and the median LSAT score of matriculating students has plunged from the 67th to the 41st percentile.

All this raises the question of whether the ongoing crisis in American legal education is creating an opportunity for central university administrators to engage in draconian cuts, in order to restore their law schools to something of a cash cow status, after years of profligate law school spending in the severely negative sum pursuit of rankings and “prestige.” Of course the answer to that question will vary across institutions, but at many universities I suspect the answer will be yes.

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