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The law school crisis: An update

Updated below

Almost exactly two years ago, in the fall of 2011, Brian Tamanaha took part in a forum at the National Law Journal regarding whether law schools were in crisis. Tamanaha noted sardonically, and correctly, that “law schools are doing just fine, thank you.”

We should be clear: law schools are NOT in crisis. Although a number of law schools shrank their entering class in 2011, enrollment at most law schools remains near all time highs, and tuition is sky high, especially at private schools. Law schools have more resources than other university departments. Law professors are paid far more than other professors and earn more than most lawyers.

The real crisis, he pointed out, was being endured by law school graduates, who faced mountains of debt and grim job prospects.

Since then, in part because of Tamanaha’s work, the situation has changed drastically. When Tamanaha took part in the NJL forum, the most recent enrollment data (for the entering class of 2010) revealed that ABA law schools had enrolled their largest first-year class ever, featuring 52,500 matriculants. These schools had enrolled a record total of 153,700 JD students over the previous three years. Law schools were both larger and much more expensive than ever: average private law school tuition had increased, in constant, inflation-adjusted terms from $15,000 in the mid-1980s to $40,000 — an astonishing 167% increase in real terms. And resident tuition at public law schools had increased by a vastly greater percentage.

What’s happened since then is what Matt Leichter has called “the law school tuition bubble” has burst. Applications have plummeted from 88,000 in 2010 to around 59,400 in 2013. And the trend shows no sign of reversing: LSAT administrations were down by 11% in October year over year, marking the 16th consecutive administration in which the number of test takers had fallen relative to the previous year. Halfway through the current administration cycle, it appears that a total of around 103,000 tests will be administered, based on historical patterns. This in turn is likely to yield around 54,000 to 55,000 total applicants in this application cycle.

In other words, around 10% fewer people will apply to law school this academic year than were admitted to law school in 2009-10. Even with more and more schools adopting de facto open admissions policies, these numbers mean that the trend in first year matriculant totals will, by next fall, look something like this:

2010: 52,500

2011: 48,700

2012: 44,500

2013: 40,500

2014: 38,000

It’s important to recognize that the effect of this sort of pattern is cumulative: each year, a larger graduating class is replaced by a smaller entering class, so that each year the effects of declining enrollment become more severe. For example, by next fall, law schools will have enrolled 123,000 people over the the previous three years — meaning that, assuming attrition levels have remained constant, there will be 20% fewer JD students enrolled in ABA law schools than there were four years previously. And even if enrollment were to plateau in 2015, schools will be looking at declining total enrollments for at least two more years beyond that.

What about tuition? While nominal tuition has continued to increase, it is far from clear that real per capita tuition — the amount actually collected per law student after taking into account the increasingly aggressive price cutting schools engage in, in the form of faux “scholarships,” will be higher next fall than it was in 2010. Indeed, some schools are now taking the unprecedented step of actually slashing nominal tuition: Just this week Ohio Northern announced that it is cutting nominal tuition by 25% next year, while last month Iowa (whose entering class is half as large as it was two years ago) announced it was drastically cutting out of state tuition for non-resident students.

All this has radical consequences for law school operating budgets. Most law school budgets are heavily tuition-dependent, as only a few schools have large private endowments, and very few faculties generate much in the way of grant money to help fund research. In addition, since almost all law schools are, as a matter of tax status, non-profits, and furthermore are engaged in a negative-sum positional game in which they fight for relative status with each other via idiotic “rankings,” schools have tended to plow almost all their ever-increasing revenue back into ever-increasing operating costs — with the exception of whatever revenues are extracted by central university administration to subsidize other university programs (As we shall see, the extent to which law schools actually subsidize other university operations varies enormously, and indeed at present it appears that, at a large number of schools, any subsidy is now going the other way). Even more problematically, these increasing operating costs have, for reasons that will become clear, a tendency to become fixed rather than variable. Any slowdown in revenue growth, let alone an actual decline in revenue, is thus going to produce serious budgetary strain.

In any case, it’s clear that a very large number of law schools are no longer doing just fine. How many? That will be the subject of a subsequent post.

Update: Further discussion.

From each according to his abilities

Tales from the New Gilded Age:

Last week, childlike Business Insider boss Henry Blodget publicly bemoaned the fact that a fancy New York restaurant employs bathroom attendants. Now, Henry’s dream has come true: the bathroom attendants are all getting fired. Great . . .

Thus, Henry Blodget, a millionaire, has successfully convinced Keith McNally, a millionaire, to fire several low-wage employees, in order to avoid any potential inconvenience to Balthazar-dining millionaires in the future.

I have mixed feelings about this. On the one hand several people who probably don’t have the option of becoming the publishers of crappy internet publications or hedge fund managers are now unemployed. On the other, the jobs they lost consist of quasi-feudal make-work that wouldn’t exist in any tolerably egalitarian society, whose primary function is to make the Masters of the Universe feel more potent than the ED pills they wash down with bottle service champagne.

Bad publicity leads to tragic consequences for law school dean

Last week somebody at New England Law decided to leak the fact that John O’Brien was strong-arming the faculty into accepting a host of buyouts, via various forms of bureaucratic terrorism.

On Tuesday, the Boston Business Journal reported that next year (not now) O’Brien will take a 25% pay cut, which will reportedly reduce his salary to $650,000. (NEL’s Board of Trustees saw fit to pay O’Brien $867,000 in FY2011 and $865,000 in FY2012. His salary for FY2013 and FY2014 is not public information).

As a point of comparison, the University of Michigan paid the dean of the law school $186,000 in 1980 (in 2012 dollars), $325,000 in 2005, and $470,000 in 2012.

Lou Reed

Lou Reed died today.

He had a liver transplant in May.

Brian Eno remarked that, while only 30,000 people bought a copy of the Velvet Underground’s first album, all of them started a band.

Decided schematic advantage

Baylor put up 505 yards of total offense against Kansas tonight.

In the first half.

. . . I just looked up Weis’s contract, and he’s guaranteed $2.5 million per year for five seasons, 2012 through 2016. In other words there’s no buyout provision! (KU is still paying Turner Gill six million in guaranteed money after firing him after just two seasons.) Given Weis’s previous track record, this has got to be the worst college football contract ever.

Also, in keeping with the fundamental principle of contemporary American life that rich people should not be forced to spend their own money to buy things, we have this:

Weis also receives the use of two vehicles, a term life insurance policy in the amount of $2 million, travel expenses for his wife and two children to attend road football games, nearly all revenue from summer camps and clinics, 50 tickets to home football games and six tickets to men’s and women’s basketball games, the use of a suite at Memorial Stadium, and a membership at Lawrence Country Club that includes all business-related expenses.

Number of first year law students with very low LSAT scores grows by 50%

Over at The Legal Whiteboard, Jerry Organ has been analyzing the LSAT scores of recent law school entering classes, and he’s come to the conclusion that the national entering class of 2013 has 50% more matriculants with LSAT scores of less than 150 than the class that graduated this year. (The percentage of such matriculants grew from 14% to 21% between 2010 and 2013. Meanwhile the percentage of matriculants with LSAT scores of more than 165 fell by 15%). He also estimates that the number of law schools whose entering class has a median LSAT of less than 150 has gone from nine to nearly 30 over the past three years. (That is, from 4.5% to around 15% of all ABA schools).

Does it matter that law students are on average getting less intelligent? (You can add as many caveats as you want about how standardized tests in general and the LSAT in particular are very far from perfect proxies for even analytical intelligence, let alone other sorts of intelligence, how there’s a lot more to being a lawyer than analytical intelligence, how measurements of native intelligence are severely distorted by SES and other factors etc. All very true. None of this alters the fact that, on average, people with high LSAT scores are smarter than people with low LSAT scores).

I’d like to address this question in the context of a question asked by commenter mch in the thread regarding the situation at New England Law School:

I think of New England the way I think of Brooklyn, a place for less-than-brilliant (with exceptions) students, most of whom just want to get their training in order to do good while make a living. I am slightly acquainted with a trustee of New England (a graduate of a grandee law school and a grandee partner at a grandee Boston firm) who shares my vision of selected “lesser” law schools. I dunno. I guess I’m trying to articulate a misgiving I sometimes feel in reading your many excellent posts, Paul, a misgiving rooted in my experience with lawyers and law professors at a variety of schools. With people who value the role of certain “lesser” law schools in both giving certain potential lawyers an opportunity and providing the world with both perfectly serviceable, and needed, estate lawyers and criminal defense attorneys for the poor…. How many Harvard vs. NEL law students do criminal defense or prosecuting, for instance?

I don’t think criminal law practice in general, either on the state or the defense side, is a good proxy for less intellectually challenging legal work, but that’s a quibble not relevant to the real issue, which is: what about types of legal practice that are in fact highly routinized, and that people with LSAT scores of less than 150 can perform perfectly adequately (yes yes there are some brilliant people who are terrible at taking standardized tests, I already acknowledged this so shut up already)? Shouldn’t there be law schools that cater to people who want to do that kind of work, as opposed to figuring out how to structure a new form of poison pill or to get the 10th circuit to reverse itself on some picayune procedural issue?

The problem here is twofold:

(1) The market is already far more than saturated with lawyers who are able, willing, and licensed to do such work.

(2) The market is slowly figuring out, in its clumsy and imperfect way, that you don’t really need to use a lawyer to get such work done adequately. Hence DIY lawyering, outsourcing, e-discovery etc etc.

So no, as a matter of rational social policy, we no longer need law schools that cater to people who can’t manage to score 150 on the LSAT (Which by the way is an extremely learnable test that measures basic reading comprehension skills more than anything else. 87.43% of LGM commenters could hit 150 on the LSAT without even studying for it).

Law school dean threatens to summarily fire faculty who don’t accept buyouts or doubled teaching loads

Paul Caron quotes an anonymous source “close to the situation” as they say:

New England School of Law plans to eliminate 14 fulltime faculty positions by August 1, 2014. Depending on how one counts, this is about 35-40% of the regular faculty. . . . Faculty have been told by Dean John O’Brien that these 14 positions will be eliminated according to the School’s needs, regardless of tenure or seniority. An incentive plan has been offered to senior faculty and certain clinical faculty, but those who don’t take it have been threatened with termination. Their decisions must be final by the end of the Fall term. Those who still do not comply or were not offered the plan, were told that if they remain, their workload during the next academic year will move from 2 to as much as 4 courses per semester and that they will be required to be at their desks from 9 to 5 each day of the work week or an equivalent time period if they are teaching evening classes.

(I asked Caron how confident he is in the source’s reliability, and he replied “100%.”).

Background on John O’Brien here, here and here.

A look at New England Law School’s tax filings for fiscal year 2012 reveals that as of a year ago NEL was making money faster than Whitey Bulger’s favorite bookmaker. The school reported $36,433,664 in revenue — almost all in the form of tuition — and only $25,786,924 in operating expenses (I’m subtracting tuition discounts from both the school’s nominal tuition revenue and its nominal expenditures), thus yielding an operating surplus of $10,646,740, or what a for-profit business would describe as a profit margin of 41.3% (NEL is of course a charitable institution, and thus its excess revenue over expenditures is not subject to taxation).

Despite this enviable financial success, Dean O’Brien — by reputation a modest man, always willing to listen to reason — actually took a pay cut, allowing the Board of Trustees to reduce his total compensation from $867,356 to $865,397. The school’s endowment grew as well, from slightly less than $55,000,000 to over $65,000,000. Other investments, not formally part of the endowment, totaled nearly eight million dollars, and this, plus the value of the buildings and land owned by the school, pushed the institution’s total assets minus liabilities from $86.6 million to $96.6 million between fiscal year 2011 and 2012.

In other words, Dean O’Brien’s operation is — or was as of 16 months ago — absolutely rolling in dough. So why is he trying to fire more than third of the faculty, while forcing the rest to work under conditions that, if actually implemented, could come to resemble those endured by people subjected to the requirements of full-time employment?

Part of the answer is that, in the wake of the Boston Globe’s January story, the school’s enrollment crashed, going from 450 matriculants in 2012 to 243 in 2013 (These numbers include both full-time and part-time students. I obtained the latter number from the school). This decline is not quite as precipitous as it sounds, since the average class at NEL over the five years prior to 2012 was just under 400, but it’s still obviously quite severe, for a school that, according to its tax filings, obtains nearly 95% of its operating revenue from tuition (Inquiring minds might want to know why a school with around $75,000,000 in liquid assets spent a grand total of $606,910 in FY2012 from investment income on its operations).

On the other hand, we don’t know how much NEL had to fork out in “scholarship” money, i.e., tuition discounts, to reel in those 243 intrepid souls.

Still, it’s remarkable that what until 15 minutes ago was pretty much a money-printing machine (although admittedly one whose primary social function at this point seems to be to turn John O’Brien into a millionaire many times over) should suddenly be in such financial distress that O’Brien is reportedly on the verge of firing more than a third of the faculty, while forcing the rest to show up for work on a regular basis.

Six degrees of Cesar Gutierrez

This is fairly awesome. Example:

Cesar Gutierrez played on the 1967 San Francisco Giants with …

Ken Henderson, who played on the 1977 Texas Rangers with …

Claudell Washington, who played on the 1990 New York Yankees with …

Deion Sanders, who played on the 1995 Dallas Cowboys with …

Scott Case, who played on the 1986 Atlanta Falcons with …

William Andrews

In 1971 I traded a Cesar Gutierrez baseball card to my eight-year-old brother for Johnny Bench. My sales pitch was that Gutierrez had set the major league record for most hits in a game.

I’ll be doing a talk at Boston University on Thursday at 10 AM on the fat war. Respondents will be UCLA sociologist Abigail Saguy and Frank Hu of the Harvard School of Public Health.

Iceland and the World Cup

As a casual soccer fan, I’m intrigued by the remarkable fact that Iceland is one of eight European teams fighting for the last four of the 13 spots allotted to European teams in the 32-team World Cup Final, to be played next summer in Brazil.

It seems incredibly unlikely that it would be possible for a volcanic island in the far north Atlantic, with a total population almost exactly the same as that of the Kalamazoo metropolitan area, to produce a dozen world class soccer players. A glance at the national team’s wiki page indicates that, until this particular qualification tournament, Iceland’s success on the world soccer stage had consisted almost entirely of beating the crap out of the Faroe Islands. Now suddenly Iceland has gotten as far as France and Portugal in the quest to make it to the sport’s biggest stage.

How did this happen? And will it eventually become a major motion picture, with a Bjork soundtrack, and starring Will Smith as the unlikely outsider who was brought in to lead Iceland to semi-glory?

International relations

This is pretty funny whether or not you understand Spanish:

(Context: Mexico needed the USA to tie or beat Panama last night to keep Mexico from getting knocked out of the World Cup. The USA was down a goal in extra time, when this happened)

The announcer is berating the Mexican national team for having to depend on a USA team playing many second stringers against Panama (the USA had already qualified for the finals). He tells the players to never forget that the USA gave them a gift that they don’t deserve, because of their arrogant and conceited attitude (Mexico could have qualified for a playoff by beating Costa Rica, in the game that was being played simultaneously and is featured on the other half of the screen, but they lost). He also says he hopes the national team coach “wears pants” and thus will do the honorable thing and resign (this is actually only the coach’s second game after the previous coach was fired).

All right, we’ll call it a draw

“It’s all over — we’ll take Senate deal.” GOP aide 20 minutes ago.

You fought with the strength of many men, Rep. Boehner.

When is enough enough?

Matt Leichter has crunched a bunch more numbers at Law School Tuition Bubble, and is projecting what private law school tuition will be four and nine years from now. Notes:

(1) These projections are in current dollars, so if these projections are correct, the nominal dollar figures will be even higher.

(2) MT is projecting that in 2017 (the year in which people applying now will be graduating), average private law school annual tuition will be just about $50,000. This means that somebody who borrows the full cost of tuition but nothing at all for living expenses will have around $180,000 in law school debt by the time the first payment comes due six months after graduation.

(3) Over the past decade, the percentage of law students paying full sticker tuition at any one time has declined a bit, from 55% to 48% (the percentage of students who pay full sticker at some point in their law school careers is higher, because many scholarships are conditional on grades).

To put $50,000 per year tuition prices in perspective,here’s Harvard’s tuition in 2013 dollars:

1971: $13,150

1981: $16,300

1991: $28,750

2001: $37,000

(Historically, Harvard’s annual tuition has tended to run about 20% higher than that of average private law school tuition).

(4) Nine years from now private law school tuition will be over $70,000 at several schools, and the average will be nearly $58,000.

The answer to the question of how this happened, and continues to happen, is complex, but probably the single most important direct cause of the increasingly preposterous tuition structure of legal education is a massive decline in student-faculty ratio, which has gone from about 30 to 1 in the late 1970s to around 14.5 to 1 today.

Those are averages, but the relative percentage decline tends to be quite consistent across the legal academic hierarchy, i.e., elite schools that had 20 to 1 ratios a couple of decades ago are at 9 to 1 today, etc.

Now within legal academia all of this is predictably enough defended on the grounds of quality. A first-rate legal education, we are told, is “inherently” expensive. This is of course classic cartel behavior: if car companies could operate like law schools they would sell nothing but luxury models, because luxury models have much higher profit margins than other cars.

This analogy also requires hypothesizing a federal government program that loans the full cost of purchasing a luxury car to anyone a car company deigns to anoint worthy of luxury car ownership, with the cost of the default on those loans falling on taxpayers. To make the analogy complete, we must also hypothesize that half the cars turn out not to have engines in them, that it is illegal to sell a luxury car on the secondary market, and that car loans can’t be discharged in bankruptcy.

In any case, a question I find particularly interesting is, when is enough enough? From one perspective, the “quality” rationale for constantly raising prices is a straight-up scam. On this view, legal education isn’t any better than it was a generation ago, and thus the tripling of the price of a law degree over that time is simply straightforward rent extraction on the part of law schools and their host universities.

If one takes that view, then all the talk of smaller classes and more clinics and fancier facilities, and more administrative services, and a more productive faculty (“productive” in this context means “more law review articles”) is just an ideological smokescreen for paying people employed by law school higher salaries to do less real work.

I certainly don’t want to discount that perspective, given that there is obviously a great deal of self-dealing going on inside America’s law schools, although, precisely because the ideology of “quality education” is so pervasive and successful, much of that self-dealing remains invisible even — or perhaps especially — to its direct beneficiaries.

But here I’d like, for the purposes of argument, to assume both that the motivations of the purveyors of higher cost/higher putative quality are pure, and that the radical increase in the cost of legal education has indeed produced significant improvements in the quality of that education. Even assuming this, two questions would seem important to answer:

(1) Does this hypothetical increase in quality justify the very non-hypothetical increase in cost; and

(2) Is there any rational and/or foreseeable end point to this process? Should we be aiming to lower average student-faculty ratios to what they now are at the most elite schools, thus replicating the process that took place over the previous generation? Should the average school have twelve clinics, instead of the six it currently has, or the three it had 30 years ago? Should the average law professor’s compensation be doubled again over the next 30 years, as it more or less was over the past 30? All these things would surely improve the quality of legal education. They merely require having the will to raise tuition to $75,000 or $100,000 per year, which in percentage terms is actually a modest increase, in comparison to that which took place over the last three decades.

Or could it be that our methods have become unsound?