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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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