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A case study

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cow

Case Western Reserve is a well-regarded private university in Cleveland. It’s undergraduate school is highly-ranked among “national universities,” its medical school is a top research institution, its engineering school is considered excellent, etc.

Case’s law school, by contrast, is merely respectable. The relevance of this is that it’s hard to argue that the law school lends prestige to the university, rather than vice versa. Given this, it’s not clear why the rest of the university should be subsidizing 35% of the law school’s operating budget.

That, however, appears to be the current situation. The law school’s revenues have plummeted in recent years for two reasons: total JD enrollment declined by 43% between FY2008 and FY2015, while over this same time effective per capita tuition fell by 41% in 2015 dollars. The result is that, while the school was getting about $24 million in JD revenue seven years ago in constant dollars, last year it pulled in around $8 million.

This seems hard to believe if one only looks at the law school’s listed tuition, which rose from $35,220 to $47,728. But perhaps more than any other school in the country Case has spent the last few years drastically cutting its real tuition, as opposed to its sticker price. In 2007, 55% of JD students at the school were paying sticker; last year that figure was 11%. Among the 45% who got a discount off sticker in 2007, the median discount was $11,000. Last year, the median discount among the 89% who weren’t paying sticker was nearly $33,000. The result is that effective per capita tuition at the school has fallen from around $34,000 (2015$) in 2007 to about $20,000 last year, while enrollment has nearly halved.

This has produced an enormous operating deficit. CWSU puts its budget documents on line, from which we learn that in FY2013 (the most recent year for which there are actual expenditure figures), the law school was getting about $4.8 million in restricted and unrestricted endowment income combined, along with $2.8 million in other sources of revenue, exclusive of tuition. Let’s bump that $7.6 million figure up to $8 million for FY2015. These budget documents also reveal that the school is getting around $2 million per year in net tuition revenue from about 100 LLM and SJD students (How the law school manages to get several dozen foreign — apparently mostly Chinese — students to spend several months of winter near the shores of Lake Erie every year, acquiring advanced degrees of, to put it mildly, dubious value, is an interesting question).

So the school seems to be generating about $18 million per year from all sources of revenue. It spent nearly ten million more than that in FY2013, after excluding the $9.5 million in tuition discounts from its nominal spending (for clarity’s sake I’m not counting nominal tuition that’s not actually collected as revenue or tuition discounts that reduce nominal revenue as expenses). Hence the 35% operating deficit, which has to be covered by the rest of the university.

Now on one level CWRU’s law school has clearly done the right thing, either out of principle or necessity (most likely some of both). The school has slashed both enrollment and real tuition, while maintaining and even slightly increasing admissions standards. Of course, given declining demand, the only way to accomplish the latter was to do the former, but plenty of schools have tossed admissions standards overboard in order to keep the loan money flowing at something like the accustomed rates.

Still, it seems unlikely that CWRU’s central administration is willing to keep letting its law school stick the rest of the university with around ten million per year in unpaid bills. (I can picture a scene in which the university’s president or chancellor or consigliere or what have you plays the role of Ricky Roma when meeting with the law school’s two deans: “You are supposed to make us money. Not lose us money. Make it.”)

The school’s full time faculty has decreased from 47 to 44 over the past five years, which, given plunging enrollment, seems like a very modest adjustment. All over American academia, the proverbial cash cows that law schools used to be in palmier days are increasingly suffering from the fiscal equivalent of bovine spongiform encephalopathy. Whether a cure will be found remains to be seen.

h/t inchininosan

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  • Steve LaBonne

    It’s also been outperformed year in and year out, for quite a long time, in bar exam passing rate by Cleveland-Marshall College of Law at much less prestigious Cleveland State University.

  • Scott P.

    (How the law school manages to get several dozen foreign — apparently mostly Chinese — students to spend several months of winter near the shores of Lake Erie every year, acquiring advanced degrees of, to put it mildly, dubious value, is an interesting question).

    That’s what, one out of every 15 million or so Chinese? I assume that even Nigerian prince scams get a better response rate than that.

  • The Dark God of Time

    I once had a teacher from Northern China. He said that it was so windy and cold that he would get blisters from the cold that would pop but he and his fellows would keep working anyway. As long as they don’t hold law school outside in the wintertime, I think there are some Chinese who could handle it.

    • postmodulator

      On the other end of the spectrum, I had a well-meaning but rather dumb professor tell me once that we would be needing to arrange for the delivery of library books for her grad student, since he was from Lebanon and couldn’t be expected to go outside in an Ohio winter. (The “rather dumb” part comes from the fact that she was telling me this when I worked for the people who fixed computers.)

      • Pseudonym

        Did she think the Lebanese would go into hibernation or something?

  • Downpuppy

    The law school at dear old Screw U* has had some more colorful issues in recent years. Dean Mitchell’s sex & harrassment scandal & the U trying to cover it up, as well as Prof. Adler’s pushing of King vs Burwell, have left them looking very silly.

    *Yes, I have a BS degree & family connections going back to Mather College
    University Circle & Cleveland Heights are really quite pleasant

  • Todd

    Mad Cowl disease?

  • djw

    (How the law school manages to get several dozen foreign — apparently mostly Chinese — students to spend several months of winter near the shores of Lake Erie every year, acquiring advanced degrees of, to put it mildly, dubious value, is an interesting question)

    We’ve been seeing an uptick in applications to our MPA program (a program that is, unsurprisingly, virtually entirely focused on working in American public administration, and it advertised as such) from a variety of foreign students (some Chinese, many from Gulf countries. For the most part, they cannot articulate why they would want this degree.

    Our working assumption is it’s a way of getting someone else (parents, governments) to pay for them to live in the United States.

    • Denverite

      My wife had three Chinese students in her freshman course last term. She said one was serious and wanted an education; two just wanted to play around in America for a year or two.

      • Pseudonym

        Doesn’t sound that different from many of us American students.

  • AR

    I am pretty sure LLMs are serving double duty. On one hand, they are offering a degree of questionable value in the job market to lawyers who should know better (or recent law grads that made a poor choice); but on the other hand, they are letting foreign lawyers get a cheaper American degree so they can take an American Bar exam, or at least claim some expertise in American law. I would love to be corrected by data, but from my own observations, most LLM programs have a pretty strong contingent of foreign lawyers, who are there because they need an American degree to take the Bar and the LLM is a lot cheaper than a JD. Also, even though American law firms generally don’t care about LLMs (tax exempted), that is not universally true for foreign firms. I have been told by non-American lawyers that they qualify for automatic pay bumps or become more marketable with an advanced degree in law, since their countries make law degrees closer to an undergraduate degree, the advanced degree impresses people more than it does here.

    • Lurker

      The law school is a bit different in Europe. I’m countries where the German-speaking tradition has controlled university education, the law degree is about a five-year program that is nowadays classified as a master’s degree. You enter it directly after high school. So, it is a postgraduate degree, but no different from the similar master’s degrees in e.g. engineering or public policy.

      The worth of an American LL.M comes from the fact that a continental law degree is about practicing law in your own country, with its civil law system. The American LL.M can be considered a proof of having an understanding of common law, which is important if you are doing contract law in an area where the contracts have American counterparts. I know large companies that retain a British in-house counsel just for that.

  • JA

    I lived in East Asia for several years.

    The locals want an American university on their resumes as a status symbol.

    Strangely, most don’t care what university it is, as long as it’s in America. They understand the prestige of HYP, but, beyond that, it’s all a blur.

    The Thai minor nobility, in particular, have a habit of doing nine-month masters degrees in places like the University of Akron or Southwestern Oklahoma. The content of the courses are irrelevant; they come back to Thailand, join the family business, and occasionally drop references to “when I was studying in America.”

    • NewishLawyer

      I would say this is largely right. My girlfriend understood HYPS, MIT, Caltech, Oxford, Cambridge, LSE, and University College. She does not understand places like my undergrad (Vassar), Williams, Amherst, Cal, Reed, Wesleyan, etc. She didn’t even here about SLACs before I mentioned them.

  • Yankee

    Now on one level CWRU’s law school has clearly done the right thing

    by all means let’s not overlook the obvious here

  • NewishLawyer

    USF Law had a small LLM program. The LLM students seemed equally split between Europeans and Chinese students. Mainly it seemed to be a way of getting into an American Bar Exam and/or a cheapish credential or a path to a VISA/Greencard.

  • NewishLawyer

    USF’s undergrad has a large number of students who are expats and mainly from China. They often seem to be very rich and drive around in sports cars and wear fancy clothes. Some of them speak English at questionable levels. I don’t think they or their parents care about the fact that USF is a mediocre school at the undergrad level. The point in many non-European countries is that an American or British university degree is more prestigious than studying at home.

    My girlfriend is from Singapore. A lot of her friends in SF are Singaporean and Malaysian expats who went to undergrad and/or grad school in the United States and stayed. Her friends tend to be the exception because they often attended elite institutions and seem to have very driven parents. They went to schools like Stanford, Carnegie-Mellon, Harvard Business School, etc. My girlfriend and her sister went to the UK for undergrad and Oxford and LSE respectively. Some of her friends attended schools like the University of York and the University of Bath.

    Can anyone tell me how Bath stands up to the National University of Singapore or the National University of Malaysia?

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  • PaulB

    Professor Campos, care to offer any speculation as to why Case Western has not been more aggressive on this? It’s not like it’s a university with a massive endowment. During the 1980s colleges with far larger relative endowments (Columbia, Northwestern, Wash U) had no problem shutting down dental schools in the light of falling demand and increased supply from newly formed public programs.

    • Paul Campos

      My guess as to why CWRU hasn’t been more aggressive so far is that the central administrators are more willing to take a wait and see attitude with a program that has a relatively large number of alumns in politically powerful positions, who can create a lot of hassle for those administrators. This characterizes the situation at a lot of universities in regard to their law schools.

      In any case it’s just extremely implausible that it makes any difference at all to CWRU’s general reputation whether the law school is ranked 48th or 67th or 89th. At some point it’s going to have to stop bleeding so much money from the rest of the institution, even if that requires serious downsizing of the operating budget. Again, the same is true for a lot of law schools.

      • Unemployed_Northeastern

        Northeastern seems to be in the same boat. The law school has much smaller entering classes, many many more >50%, full, and more than full tuition discounts have to be given to try to keep the GPA and LSATs level, and it is almost certainly losing x million dollars per year. Of course, they started a dubious LLM program and even more dubious MLS program to attempt to recoup some of their losses…

        Meanwhile, the law school was historically ranked much higher than the undergrad, but now that NU has successfully executed its 15-year gamesmanship of USNWR, the undergrad is ranked considerably higher than the law school, which is elastic enough that I’m pretty sure it moves in a nearly 30 point spread, from ~70th to ~100th.

        Long story short, the central administration at NU is only slightly less avaricious than their counterparts at NYU, and I’m sure the money hole that is the law school must be getting on their nerves, particularly as they sunk like $20 million less than a decade ago to remodel and expand the law school. And there is already a history of the law school closing, so fingers crossed.

  • Mike in DC

    I would love to see a post or two on some of the shenanigans that are being engaged in by the first tier law schools which are not the vaunted “T14” schools(i.e., those schools ranked from 15th to about 50th). Plenty of them have also gotten creative with their employment stats and have also experienced enrollment issues. Finishing in the top half of the class at one of the top 50 law schools in the country does not even ensure a favorable employment outcome nowadays. But God forbid any of the deans or prominent faculty at one of these schools acknowledge that publicly.

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