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Where has all the money gone? The decline in faculty salaries at American colleges and universities over the past 40 years

[ 161 ] March 2, 2015 |

Once upon a time, I began to look at the financing of law school education in America, and was amazed by what I found. Recently, I’ve been researching the economic structure of American higher education in general. My amazement is growing . . .

Everyone is aware that the cost of going to college has skyrocketed since [fill in any date going back to the middle of the last century]. Why has this happened? This post is about one possible explanation, that turns out not to have any validity at all: increases in faculty salaries. In fact, over the past 40+ years, average salaries for college and university faculty have dropped dramatically.

Salaries have increased, sometimes substantially, for a tiny favored slice of academia, made up of tenured professors at elite institutions, some professional school faculty (business, law, medicine), and most especially faculty who have moved into the higher echelons of university administration. Such examples merely emphasize the extent to which the economics of the New Gilded Age have infiltrated the academic world: the one percent are doing fabulously well, and the ten percenters are doing fine, while the wretched refuse of our teeming shores will adjunct for food.

Numbers:

Average salary for all full-time faculty in degree-granting post-secondary institutions (this category includes instructors and lecturers, as well as all ranks of professors) in constant 2012-13 dollars:

1970: $74,019

2012: $77,301

These figures, of course, give a very incomplete picture of the economic circumstances of the actual teaching faculty in America’s institutions of higher education.

One of the more astonishing statistics regarding the economics of our colleges and universities is that, despite the fantastic increase in the cost of attending them, there are now on a per-student basis far fewer full-time faculty employed by these institutions than was the case 40 years ago. Specifically, in 1970 nearly 80% of all faculty were full-time; by 2011, more part-time than full-time faculty were employed by American institutions of higher learning (note that the former category does not include graduate students who teach).

While comprehensive salary figures for part-time faculty aren’t available, it’s clear that their salaries are on average vastly lower than those of full-time faculty (and of course when it comes to who does the bulk of the actual teaching at many schools, the designations “full-time” and “part-time” have a distinctly Orwellian flavor). If we assume that “pat-time” faculty earn one-third as much as their full-time counterparts — and this seems improbably optimistic, given that the average compensation for part-time faculty for teaching a three-credit course is around $2,700 — that would mean that in 1970 average salaries for college and university faculty were nearly 30% higher, in real dollars, than they are today.

This an astonishing figure, given that, in the last 40 years, tuition at private colleges has more than tripled, while resident tuition at public institutions has nearly quadrupled.

So where has all that money gone? Here are a couple of plausible-sounding answers, often cited by university administrators, which turn out to have little or nothing to do with soaring college costs:

(1) Faculty benefits. While it’s true that the amount universities spent on benefits for full-time faculty members nearly doubled between 1977 and 2011, going from $11,832 to $22,754 (2012$), the vast majority of this per capita cost increase was ameliorated by the replacement of full-time faculty with “part-time” faculty, who of course are almost never eligible for any faculty benefits. (BTW, 70% of the increase in the cost of benefits for full-time faculty was accounted for by employer contributions to the cost of medical insurance plans, meaning that most of this nominal increase in total compensation for full-time faculty went straight into the pockets of third parties, i.e., insurance companies and health care providers).

(2) Back-filling cuts in state support for higher education. Total state support for higher ed in America increased from approximately $42 billion (2014$) to $80 billion between 1970 and 2014, while total enrollment in public institutions of higher education increased from 6.43 million to 14.88 million. This means state support decreased from about $6,550 to $5,375 per student. This is not a trivial decrease, but on the other hand, federal Pell Grants, which didn’t exist in 1970, totaled $33.7 billion in 2012-13. Roughly 70% of this amount went to students enrolled in public schools, meaning that total tax subsidies to public higher education are actually higher now per student than they were in 1970.

In addition, another consequence of the New Gilded Age is that college endowments have exploded: while 18 institutions had endowments of at least one billion dollars (in 2014$) in 1987, 91 had reached that level last last year, while hundreds of others had endowments in the hundreds of millions. (A particularly extreme example is provided by my alma mater. When I graduated in 1982, the University of Michigan’s total endowment was $115 million. As of last June, it was $9.7 billion, which represents a 34-fold increase in constant dollars. Over this same time, undergraduate resident tuition has more than tripled in real terms, from less than $5,000 (2014$) to nearly $15,000.)

It’s clear that, over the past few decades, American higher education has turned into a veritable money-printing machine. What’s also clear is that, with few exceptions, this massive increase in revenue isn’t going to the people who do the teaching in these institutions.

Profiles in rent-seeking: College athletics edition

[ 175 ] February 28, 2015 |

db

The athletic directors and the commissioner of the Big 10 conference are very, very, very concerned about putting the education of their unpaid quasi-professional athletes students who participate in extra-curricular activities first. Very concerned. How concerned? This much:

“While we are comfortable generating multiple ideas about an ‘education first’ approach to intercollegiate athletics in the twenty-first century, we won’t go it alone on any of these matters,” Big Ten commissioner Jim Delany said in the statement. “We look forward to working with our colleagues in the NCAA Division I governance structure, and to exploring a broad exchange of ideas from both inside and outside of intercollegiate athletics.”

ESPN.com had previously reported that the Big Ten had begun internal discussions about making all or some freshman athletes ineligible, a measure that would have the greatest effect on the current one-and-done climate in college basketball.

Delany, who was getting paid just $1.8 million by the conference two years ago, and who is strongly opposed to college football and basketball players having their salaries raised from their current level of $0.00, was walking back those reports, since even the rumor that the conference was considering such a proposal was already being used against the conference’s football and men’s basketball teams (the two sports that make all the money) by coaches from other, less educationally-serious conferences.

But the conference is very serious about education. How serious? This serious:

Purdue athletic director Morgan Burke said he believes in the NCAA policy that prohibited freshmen participation before a 1972 reversal.

“I, for one ,as a Big Ten AD, am tired of being used as a minor league for professional sports,” Burke said. “What was right for the NCAA in the first 70 years of its history, maybe we ought to go back and say, ‘What’s changed?'”

Among Big Ten leaders, he said, a consensus exists to “get education back on the proper platform.”

What’s changed? Oh it is a deep and abiding mystery. Or is it?

Gaze upon my balance sheets, ye mighty, and despair:

Salary of Michigan athletic director Don Canham in 1980 (Canham at this point was the most successful AD in the country, having transformed Michigan’s athletic department into the most profitable revenue-enhancing in all of college sports): $54,000

Salary of Michigan football coach Bo Schembechler in 1980 (Schembechler had the highest winning percentage of any college football coach during the 1970s): $105,000

You can multiply these numbers by 2.87 to account for inflation.

Salary of Michigan athletic director Dave Brandon in 2014-15: $900,000 base, $175,000 in deferred comp, up to $200,000 in performance bonuses.

Salary of new Michigan football coach Jim Harbaugh: $7,000,000.

Brandon won’t be collecting any performance bonuses this year, as he pulled off the astonishing feat of doing such an atrocious job that he got several hundred students to march on the university president’s house demanding he be fired, which he subsequently was. He will collect several million dollars in severance pay, however, because The Market. (An amusing account of some of his follies can be found here). My favorite detail of Brandon’s contract is that he and his wife got the free use of dealer-provided cars, with the dealers paying not only for the cars, but for registration and license plates, while the university was left on the hook for insuring the vehicles, as well as for the cost of “routine oil changes.” (BTW Brandon is the ex-CEO of Domino’s Pizza, and had, conservatively speaking, a net worth well into the tens of millions of dollars, before he took a job with a seven-figure salary that also covers the cost of routine oil changes for his free cars).

And Brandon wasn’t even in the top quarter of Big 10 AD pay last year, as the athletic directors at Ohio State, Nebraska, and Wisconsin were all pulling down more than one million dollars in base pay alone.

Those salaries in turn pale in comparison to the $3.24 million being paid two years ago to what might — might — be the highest-paid law professor in the land, Vanderbilt athletic director David Williams (Williams also has an appointment on the Vanderbilt law faculty, which should provide a soft landing if the Commodores’ football team’s current streak of five four three two one zero good football seasons in a row should ever be broken. Williams’ salary is largely a product of the sweetheart deals administrative grifter extraordinaire Gordon Gee put in place before he high-tailed it out of Nashville).

Williams was in the news yesterday when he announced that Vanderbilt’s basketball coach Kevin Stallings wouldn’t be suspended, after he was caught advising one of his student-athletes that he would “fucking kill you” if his on-court deportment did not improve posthaste. (To be fair, Stallings explained to ESPN afterwards that his stated intention to kill his own player was merely a figure of speech, and should not have been taken literally.)

In the light of all this, Burke can perhaps be forgiven if he feels that the half million dollars he’s getting paid to be Purdue’s AD this year, not counting up to another $120,000 in “performance bonuses,” is practically a vow of poverty. On the third hand a cynic might point out that Burke has suckled unmolested at the increasingly engorged teat of big time college athletics for the 22 years he’s held his current position, and that he’s seen his own stupendous salary go up by 50% over the past six years alone.

I don’t get it

[ 126 ] February 27, 2015 |

dress

Are the people who say this dress is gold and white pulling some sort of internet-wide prank?

Is Roger Pielke the victim of a McCarthy-style witch hunt?

[ 65 ] February 26, 2015 |

mccarthy

Earlier this week Erik flagged a NYT story revealing that one of the most prominent climate change skeptics had failed to disclose, as he was required to do, that he’s gotten a lot of funding from energy interests.

This story is part of a real problem, since Wei-Hock Soon is far from the only climate change skeptic whose professional expertise and/or motivations are open to legitimate question.

In the wake of the story, US Representative Raúl Grijalva (D-AZ), the ranking member of the House of Representatives Committee on Environment and Natural Resources, sent a letter to seven institutions, requesting information regarding the funding sources of seven academics whose work has been associated with some aspect of climate change skepticism.

One of those institutions is the University of Colorado, which got this version of the letter on Tuesday, regarding Prof. Roger Pielke, who teaches in the Environmental Studies Program. Pielke is none too happy about this development:

[L]et me make one point abundantly clear: I have no funding, declared or undeclared, with any fossil fuel company or interest. I never have. Representative Grijalva knows this too, because when I have testified before the US Congress, I have disclosed my funding and possible conflicts of interest. So I know with complete certainty that this investigation is a politically-motivated “witch hunt” designed to intimidate me (and others) and to smear my name.

For instance, the Congressman and his staff, along with compliant journalists, are busy characterizing me in public as a “climate skeptic” opposed to action on climate change. This of course is a lie. I have written a book calling for a carbon tax, I have publicly supported President Obama’s proposed EPA carbon regulations, and I have just published another book strongly defending the scientific assessment of the IPCC with respect to disasters and climate change. All of this is public record, so the smears against me must be an intentional effort to delegitimize my academic research.

Pielke came to Rep. Grijalva’s notice (or more realistically to that of his staff, about which more in a moment) because he has testified to Congress regarding his research on the relationship between extreme weather events and climate change. Pielke says he takes the same view as the Intergovernmental Panel on Climate Change regarding this matter. To quote the latter: “Long-term trends in economic disaster losses adjusted for wealth and population increases have not been attributed to climate change, but a role for climate change has not been excluded.” Whether and to what extent there’s a relationship between carbon emissions and such events is a hotly debated topic among mainstream climate scientists, so Pielke is understandably aggrieved that his position on the matter has gotten him labeled a climate skeptic or denialist by various lazy and/or dishonest people.

What seems to have happened here is the Congressional staff members who were tasked with identifying climate skeptics whose financial ties might be worth inquiring into further did a poor job of distinguishing between actual climate skeptics and somebody like Pielke.

I have a lot of sympathy for Pielke, as the root of this kerfuffle seems to be Pielke’s disagreement with an Obama administration science adviser, John Holdren:

When Holdren links specific weather events to human-caused climate change—such as the California drought or the cold winter—he is exaggerating the state of scientific understandings.

His subsequent attack on me has him serving not as science advisor to the president, but rather wielding his political position to delegitimize an academic whose views he finds inconvenient. We academics wouldn’t stand for such behavior under George W. Bush and we shouldn’t under Barack Obama either.

Naturally, it’s disconcerting to have a member of Congress send a letter to your employer, suggesting if only by implication that you may be a bad or corrupt scientist. Furthermore, Pielke argues that his sworn testimony to Congress regarding the sources of the funding of his research makes those sources a matter of public record, which in turn makes the letter to his administrative superiors demanding to know what those sources are superfluous, and perhaps even vaguely threatening.

On the other hand . . . Pielke’s reaction to all this seems in its own way equally excessive. His blog post on the matter features a photo of the cover of Joe McCarthy’s magnum opus, and he says that the “smears” to which he’s been subjected are chasing him out of the climate change research business permanently:

The incessant attacks and smears are effective, no doubt, I have already shifted all of my academic work away from climate issues. I am simply not initiating any new research or papers on the topic and I have ring-fenced my slowly diminishing blogging on the subject. I am a full professor with tenure, so no one need worry about me — I’ll be just fine as there are plenty of interesting, research-able policy issues to occupy my time. But I can’t imagine the message being sent to younger scientists. Actually, I can: “when people are producing work in line with the scientific consensus there’s no reason to go on a witch hunt.”

When “witch hunts” are deemed legitimate in the context of popular causes, we will have fully turned science into just another arena for the exercise of power politics. The result is a big loss for both science and politics.

This strikes me as evidence of both political naivete and an unduly thin skin. While Pielke has good reason to be deeply annoyed with Griljava’s letter, comparing it, or the criticism he’s received from Holdren, to a McCarthyite-style witch hunt is ridiculous. When you get involved in a politically contentious issue, people are going to criticize you. Some of these criticisms will be unfair, and some will be flatly dishonest. Your personal motivations and professional competence will be called into question, often by morons whose sum total of knowledge on an issue to which you’ve devoted years of study consists of bullet points they read on a blog somewhere. That’s how the politics game is played, even when it involves questions of science (or “science” as the case may be).

If stuff like this is going to chase you out of the arena, you’re going to make the ghost of Teddy Roosevelt cry.

Anyway, Pielke’s petulance is leading right-wing critics to characterize him as a Galileo-like martyr to the cause of climate skepticism. Rich Lowry:

[P]roponents of a climate alarmism demanding immediate action to avert worldwide catastrophe won’t and can’t simply let the science speak for itself.

In fact, for people who claim to champion science, they have the least scientific temperament imaginable. Their attitude owes more to Trofim Lysenko, the high priest of the Soviet Union’s politicized science, than, say, to Gregor Mendel, the founder of modern genetics whose work was shunned by Lysenko for ideological reasons. . .

It has to be counted a small victory in this project that Pielke will no longer be an obstacle. . .

And so the alarmists have hounded a serious researcher out of the climate business. All hail science!

The other day, the head of the IPCC, Rajendra Pachauri, quit amid a sexual harassment scandal and noted in his letter of resignation: “For me the protection of Planet Earth, the survival of all species and sustainability of our ecosystems is more than a mission. It is my religion.”

Is it too much too ask that the man in charge of a project supposedly marshaling the best scientific evidence for the objective consideration of a highly complex and contested phenomenon not feel that he has a religious commitment to a certain outcome?

Why, yes it is. The kind of people who run inquisitions may lack for perspective and careful respect for the facts and evidence. But they never lack for zeal.

Now this isn’t completely false. Like any other contentious issue, climate science produces its zealots and true believers, whose dogmatic commitment to a certain viewpoint isn’t open to revision in the light of further evidence. But of course such people can be found on both sides of any policy debate. And in this case the debate among scientists remains extremely lopsided, for reasons that ultimately don’t seem to have much of anything to do with bad motivations on anyone’s part.

Thank you for your service?

[ 146 ] February 25, 2015 |

On Sunday the Times had a piece about how some (many?) military veterans don’t like to be “thanked” for their service by civilians:

To some recent vets — by no stretch all of them — the thanks comes across as shallow, disconnected, a reflexive offering from people who, while meaning well, have no clue what soldiers did over there or what motivated them to go, and who would never have gone themselves nor sent their own sons and daughters.

To these vets, thanking soldiers for their service symbolizes the ease of sending a volunteer army to wage war at great distance — physically, spiritually, economically. It raises questions of the meaning of patriotism, shared purpose and, pointedly, what you’re supposed to say to those who put their lives on the line and are uncomfortable about being thanked for it.

Mr. Garth, 26, said that when he gets thanked it can feel self-serving for the thankers, suggesting that he did it for them, and that they somehow understand the sacrifice, night terrors, feelings of loss and bewilderment. Or don’t think about it at all.

“I pulled the trigger,” he said. “You didn’t. Don’t take that away from me.”

It’s an interesting piece, which raises implicitly various tangential issues:

(1) I have the impression that in post-9/11 America the public glorification of the military has intensified quite a bit. Obviously there’s always been a lot of this, but it seems much more pervasive today. A trivial but symptomatic example: at PGA golf tournaments, there’s now always one hole tended by a member of the military. The flag on the pin, which normally merely marks the hole number, is a US flag, and the competitors are obviously expected to engage in a public display of thanking the service member. Readers can no doubt think of many similar semi-compulsory rituals. Needless to say this sort officious celebration of the military’s role in American life ought to raise the awkward question of what exactly what that role has been in recent decades. Yet the politically fraught character of this ritualized gratitude isn’t something the piece acknowledges. (The piece also uncritically reprints the urban legend that Vietnam veterans were spit on after returning home from the war).

(2) These sorts of rituals raise a number of other awkward questions. For one thing, the Times’ piece treats military service as if the typical experience of a service member is something akin to the experience of the veteran profiled in the article, who nearly died in a muddy ditch in Afghanistan, down to his last bullet, with he and his comrades being raked by Taliban machine guns. But the vast majority — according to this article 85% — of military veterans never see combat of any sort, let alone the kind of horrifying experience described in the Times’ piece.

For that 85%, military service ends up being a fairly ordinary job, featuring generally low pay but excellent fringe benefits. In other words, the 85% are in many ways typical government workers, and needless to say nobody is thanking the typical government worker for his or her service — they’re more likely to be complaining about that worker’s supposedly easy work schedule, and the inherent unfairness of those sweet, sweet benefits (They have real pensions!).

(3) The larger issue here is what the concept of “public service” ought to entail. For example, the federal government’s Public Service Loan Forgiveness program has, comparatively speaking, very generous provisions, relative to its standard loan forgiveness programs, requiring only ten rather than 20 or 25 years of repayment, and, crucially, not treating the debt forgiven as income at the end of the repayment period. This seems more than justifiable if, for instance, a law graduate benefiting from PSLF is choosing to represent indigent defendants for a $45,000 salary as opposed to getting paid many times that to work for a big law firm, but framing the matter that way creates an unrealistically easy case. (For one thing, only a very small percentage of law graduates could be faced with such a choice, even in theory).

A wide variety of jobs constitute performing “public service,” technically speaking. For example, Nora Demlietner, who announced yesterday — no doubt in the wake of a friendly chat with the university’s president — that she was “stepping down” as Washington & Lee’s law school dean, two and half years after taking that job, is a public servant, and would be eligible for PSLF loan forgiveness, if she should find herself in need of the program’s provisions.

This seems unlikely, as she’s been paid more than three million dollars since 2007 to “serve” as dean of Hofstra’s and W&L’s law schools. I doubt that the members of Hofstra’s 2011 graduating class, who were trying, mostly unsuccessfully, to get any sort of legal employment at all at the same time Detlietner was interviewing for her new gig at W&L, are inclined to thank her for her service.

To be fair, Detlietner’s “public service” seems the epitome of altruism in comparison to the sacrifices being made by her bosses at Hofstra and W&L, both of whom were or are currently pulling down seven figures annually to “serve” the public interest.

I would like to know more

[ 298 ] February 23, 2015 |

Scott references Glenn Harlan Reynolds’ column in which GHR cites Robert Heinlein’s Starship Troopers for the proposition that some sort of altruistic public service ought to be a prerequisite for the right to vote:

Science fiction writer Robert Heinlein, in his famous novel Starship Troopers, envisioned a society where voters, too, had to demonstrate their patriotism before being allowed to vote. In his fictional society, the right to vote came only after some kind of dangerous public service — in the military, as a volunteer in dangerous medical experiments, or in other ways that demonstrated a willingness to sacrifice personally for the common good. The thought was that such voters would be more careful, and less selfish, in their voting.

So when the five-day wonder of questioning Barack Obama’s patriotism is over, perhaps we should address another question: How patriotic is the electorate? And how long can we survive as a nation if the answer is “not very”? And we should proceed from there.

I’ve never read Heinlein’s novel, and ever since I saw Paul Verhoeven’s film version I’ve wondered if the book itself is a satire on the fascistic values at the psychological core of nationalism, or a celebration of those values, or something else. I enjoyed the film, because I took it to be the former, although it would be pretty disgusting if taken straight, as some reviewers did at the time.

Anyway, I’ve thought and written about the relationship between authorial intention and textual meaning in the context of legal and literary works, but I’ve never really considered that question in regard to films. Films, especially big budget major studio productions, seem like especially complex texts, because their authorship is so complex.

What does it mean to say that Starship Troopers is “really” a satire, and not a campy glorification of fascist politics and aesthetics? That Verhoeven, if he is understood to be the film’s primary author, intended to the taken as the former? That, without regard to what Verhoeven or anyone else involved in the film’s creation may have intended, this interpretation makes it a much better film, aesthetically and/or politically?

And what about Heinlein’s novel? Can it be read as a satire, or is it too obvious that Heinlein intends the ideas in it to be understood unironically, which certainly seems to be Reynolds’ interpretation?

The education dodge

[ 190 ] February 23, 2015 |

Paul Krugman points out how arguments that claim not enough Americans have college degrees work as smokescreens to obscure the real drivers of social and economic inequality:

[M]y sense is that there’s a new form of issue-dodging packaged as seriousness on the rise. This time, the evasion involves trying to divert our national discourse about inequality into a discussion of alleged problems with education.

And the reason this is an evasion is that whatever serious people may want to believe, soaring inequality isn’t about education; it’s about power. . .

The education-centric story of our problems runs like this: We live in a period of unprecedented technological change, and too many American workers lack the skills to cope with that change. This “skills gap” is holding back growth, because businesses can’t find the workers they need. It also feeds inequality, as wages soar for workers with the right skills but stagnate or decline for the less educated. So what we need is more and better education.

My guess is that this sounds familiar — it’s what you hear from the talking heads on Sunday morning TV, in opinion articles from business leaders like Jamie Dimon of JPMorgan Chase, in “framing papers” from the Brookings Institution’s centrist Hamilton Project. It’s repeated so widely that many people probably assume it’s unquestionably true. But it isn’t. . .

[T]here’s no evidence that a skills gap is holding back employment. After all, if businesses were desperate for workers with certain skills, they would presumably be offering premium wages to attract such workers. So where are these fortunate professions? . . .

While the education/inequality story may once have seemed plausible, it hasn’t tracked reality for a long time. “The wages of the highest-skilled and highest-paid individuals have continued to increase steadily,” the Hamilton Project says. Actually, the inflation-adjusted earnings of highly educated Americans have gone nowhere since the late 1990s.

So what is really going on? Corporate profits have soared as a share of national income, but there is no sign of a rise in the rate of return on investment. How is that possible? Well, it’s what you would expect if rising profits reflect monopoly power rather than returns to capital.

As for wages and salaries, never mind college degrees — all the big gains are going to a tiny group of individuals holding strategic positions in corporate suites or astride the crossroads of finance. Rising inequality isn’t about who has the knowledge; it’s about who has the power.

It’s always suspicious when “everyone” is in favor of something. For a couple of generations now, almost all opinion-makers across the ideological spectrum have held the view that more formal education is an almost magical panacea for fundamental social and economic problems. On the glibertarian/corporatist right, this view dovetails nicely with a commitment to individual achievement as opposed to structural changes: as long as there’s a poor black kid going to Princeton (there probably is at least one) then Land of Opportunity, Shining City on a Hill, Bootstraps — you know the drill.

In other words, as long as the educational system helps make the class structure something less than completely rigid, then it’s A-OK for the top .01% percenters to pay a lower effective tax rate than the average American, while unions are wrecked and median wages fall, corporate profits soar, etc., because after all this poor black kid got a full ride to Princeton, got into HBS, and now he’s got Jamie Dimon’s job. (OK this didn’t actually happen, but the point is that it could happen, which is all that counts in glibertarian land).

On the liberal left, the commitment to higher ed as a magic bullet is based on a less morally obnoxious but even more economically dubious belief, to wit the theory that sending more people to college ameliorates structural unemployment via enhancement of human capital. As Krugman points out, the problem with this theory is that it doesn’t appear to be true, or at least not any more.

Who benefits from the ubiquity of these beliefs among all right-thinking people? One obvious group of beneficiaries consists, as Krugman notes, of the current Lords of Capital. There’s another group he doesn’t mention, which includes those atop our ever-growing Educational Industrial Complex, who benefit from a system that has quasi-socialized of the cost of higher ed (in the form of more than $1.2 trillion in educational loans, only 37% of which are currently in timely repayment), and quasi-privatized the immense profits it generates.

More on the troubles at Washington & Lee

[ 91 ] February 20, 2015 |

I noted yesterday that Washington & Lee University has announced a “strategic plan,” intended to get the law school to stop costing it money sooner rather than later.

After crunching some numbers, it’s fairly easy to spitball how much money the law school is currently losing, by comparing its estimated overall revenue with the details of the university plan designed to get the school’s fiscal mind right.

Before getting to those numbers, here are a few facts about the university:

W&L isn’t really a university — it’s a very rich, very highly-ranked, liberal arts college, with a law school somewhat incongruously tacked on to the place.

As for its ranking, I was taken aback to discover that the college keeps company with places like Bates and Middlebury, just below the Amherst/Swarthmore line.

One reason for this lofty position is that the school is flat-out loaded: the endowment was $916 million in FY2013, which probably means it will reach the one billion mark this year if it hasn’t already. A couple of years ago W&L had the 11th-largest endowment on a per capita basis of any college or university in the country, and the fifth largest of any liberal arts college.

The other is that it’s very old, having been saved from financial extinction in the late 18th century by none other than George Washington himself. The college named itself after him, and then added Robert E. Lee’s name after Lee’s five-year presidency following the War of Northern Aggression (Lee is actually responsible for creating the law school, which was an undergraduate degree at the time).

Anyway, the place seems to have been the prime finishing school for well-heeled sons of the Old Confederacy (the college didn’t admit women until 1985, and the law school may have been the last law school in the country with an all-male class, as the first woman wasn’t admitted until 1972), before it started playing the ratings game so successfully, when college ratings started to be a big thing. 80% of undergraduates are in the Greek system, there are a bunch of secret societies of long standing, and in short the whole thing sounds like a setting for a sardonic Tom Wolfe novel.

As for the law school, it too played the ratings game very well. Although it’s not and never will be nearly as elite an institution, comparatively speaking, as the college, the law school almost always showed up in the 20-25 range, even though few of its graduates actually got prestige-oriented legal jobs. (In recent years about 15% of the class has gotten either big firm jobs or federal clerkships, which is a very low figure for a top 25ish law school).

The law school has traditionally had about 390-400 students, with entering classes of around 120-125, supplemented with a couple years’ worth of transfer students. Three years go it ended up admitting a class of 187 for some reason (my guess would be money), but over the last couple years the law school has struggled badly in the context of a cratering applicant pool at both the national and local level.

This last couple of admissions cycles have been a bit of a disaster for the school, as it ended up enrolling a combined total of only 212 students, despite slashing admission standards (the median LSAT fell four points in just two years) and throwing massive amounts of cash in the form of tuition discounts at the applicant pool. The school got only 10% and 11% of its admits to matriculate this year and last, which, along with a sudden plunge in the rankings, from 26th in 2013 to 43rd this year, are no doubt the proximate causes of the university administration’s displeasure (The fall in admissions doesn’t seem to have much if anything to do with the fall in the rankings, as the school’s ranking didn’t slip until this year, while admissions cratered in 2013).

The law school’s financial situation can be sussed out readily enough from its 509 disclosures and the university’s reaction. The school is netting about $9.8 million in tuition this year after discounts, charging an effective tuition of around $26,000, i.e., about 58% of its advertised sticker price of more than $45,000. The endowment is throwing off around $4.5 million, and I’m guessing annual giving is around $750,000, since the school is supposed to increase that figure (how is a good question) to $1.5 million going forward, and a pledge to double annual giving sounds like what harried administrators would most likely do in these circumstances. Thrown in another million bucks for grant money, ancillary income etc., and the law school is probably generating about $16 million from all sources, give or take.

We can also figure on the back of this particular envelope that the law school is being told to cut about two million dollars per year in operating expenses. Six faculty positions add up to around $1.3 million per year (based on an average tenure track compensation package of $215,000 in salary and benefits; in FY2013 three senior faculty were getting around $300K in compensation), while the 2% salary cuts for a few senior types are a few tens of thousands of basically symbolic dollars.

The administrative position cuts probably add up to around 400K to 500K, and cutting operations by 10% will save another 350K or so. All told that adds up to little more than two million per year in cuts, which can be added to around four million per year in increased revenue that is supposed to balance the budget: three million per year from raising the endowment distribution from 4.5% to 7.5%, 750K from sprinkling magic pixie dust on annual giving to double it, and another $300K or so on average from 2% annual tuition tuition hikes. This in turn suggests that the school is currently spending about $20 million, since, per the university’s plan, enrollment is going to decline about 20% from its current level, which adds up to another two million in revenue that needs to be replaced (it’s probably not a coincidence that the mandated spending cuts add up to just about exactly this figure).

A particularly tricky aspect of university accounting is that an estimate of the law school’s expenses includes both the direct expenses the school generates (basically personnel plus operating) and indirect expenses. The latter represents the law school’s share of university operating expenses not directly generated by the various academic units within the institution, i.e., central administration, common facilities, sports — the school has 22 [!] varsity sports teams, which generate millions of dollars per year in operating costs and essentially no revenue — advertising and promotion etc.

Small elite colleges have relatively high indirect costs, because they don’t benefit from economies of scale, and because institutions with access to a lot of money spend a lot of money — they’re “non-profits” after all, which means all revenue is internalized.

This probably means that W&L’s administrators expect the law school to fork over several million dollars per year over and above the school’s direct expenditures, and that this expectation isn’t even a product of trying to use the law school as a cash cow, to cross-subsidize other parts of the institution, but simply a product of the overall cost structure of the university.

In any case Washington & Lee is in one sense a rather special case among law schools. No other elite liberal arts college has a law school attached to it, and W&L’s law school will never be nearly as prestigious an institution, relatively speaking, as the larger institution of which it’s a part (The category of elite law schools is limited to 14, and 14 only, and despite W&L’s success at gaming the rankings no one has ever considered it to be anywhere close to that magic circle). In other words, the only substantial benefit the college was getting from the law school was that at one point the latter actually made money for the former.

At this moment, I suspect the college’s leadership is rather regretting having to manage what is something of an expensive white elephant, and that this regret is taking the form of very concrete financial demands. It will be interesting to see what happens if the law school finds itself unable to meet those demands.

Washington and Lee Law School cuts salaries, downsizes faculty and staff, invades corpus of endowment

[ 39 ] February 19, 2015 |

From the university’s web site:

Beginning with the 2015-16 academic year, the school will enroll entering 1L classes of about 100 students, resulting in a full-time student body of about 300. For comparison’s sake, the current law school student body is 374 and includes the largest third-year class in school history. The Class of 2017, which entered last fall, had 101 members.

Tuition will increase at an annual rate of 2 percent per year.

Financial aid, which will continue to be allocated beyond historical norms, will gradually return to sustainable levels after a transition period.

In October 2014, the Board of Trustees authorized an increase in the payout from the law school’s endowment income to 7.5 percent through 2017-18. This will add about $3 million to the law school budget in 2015-16.

The goal for the Law School Annual Fund, which provides unrestricted operating funds, has been increased to $1.5 million for 2014-15.

The current student-faculty ratio (9:1) will be preserved, but with smaller enrollments the allocation for faculty compensation will be reduced by about 20 percent (equivalent to six positions) and will be achieved through attrition over the four-year period. In addition, some senior faculty salaries will have a one-time salary reduction of 2 percent with salaries frozen for all faculty during the three-year period.

Six administrative and staff positions will be reduced over a five-year period, and there will also be budget reductions for visiting and adjunct faculty.

Operating budgets will be reduced by 10 percent in 2015-16 with the exception of the library budget, which will grow by 2 percent.

Although the financial model currently shows operating deficits for 2014-15 through 2017-18, the law school budget is projected to be back in balance by the 2018-19 academic year.

Prior to last year, the school’s total JD enrollment was consistently between 390-405 JD students, so this plan represents about a 25% reduction in the student body relative to historical norms.

W&L got a lot of good press a few years ago for transforming their third year of law school into an “experiential” externship-based program. The program didn’t result in more jobs for their graduates, however, and now the school’s central administration is bringing down the budget hammer.

Similar stories are now playing out all over legal academia.

David Frum wants to know why a gift to the Clinton Foundation isn’t a bribe to the current Secretary of State

[ 144 ] February 19, 2015 |

Ah the charms of Twitter-level analysis:

In what way were gifts to Clinton Foundation not a gigantic bribe to a serving Secretary of State & highly likely future president?

. . . oh wait, this has already been topped in this 24-hour cycle’s race for most ridiculous statement by a Prominent Conservative:

Rudy Giuliani went straight for the jugular Wednesday night during a private group dinner here featuring Wisconsin Gov. Scott Walker by openly questioning whether President Barack Obama “loves America.”

The former New York mayor, speaking in front of the 2016 Republican presidential contender and about 60 right-leaning business executives and conservative media types, directly challenged Obama’s patriotism, discussing what he called weak foreign policy decisions and questionable public remarks when confronting terrorists.

“I do not believe, and I know this is a horrible thing to say, but I do not believe that the president loves America,” Giuliani said during the dinner at the 21 Club, a former Prohibition-era speakeasy in midtown Manhattan. “He doesn’t love you. And he doesn’t love me. He wasn’t brought up the way you were brought up and I was brought up through love of this country.”

With Walker sitting just a few seats away, Giuliani continued by saying that “with all our flaws we’re the most exceptional country in the world. I’m looking for a presidential candidate who can express that, do that and carry it out.”

The day is young.

Don LeDuc, superstar

[ 34 ] February 18, 2015 |

Wolfcastle: The film is just me in front of a brick wall for an hour and a half. It cost $80 million.
Jay Sherman: How do you sleep at night?
Wolfcastle: On top of a pile of money, with many beautiful ladies.

If law school scamming were a slam dunk competition, this would be Western Michigan Thomas Cooley Law Dean Don LeDuc’s entry in the competition:

LeDuc, who got paid $1.9 million by the school between 2011 and 2013, and who did such a superb job handling the institution during this time that it only had to fire 59% of its full-time faculty last August, has launched an intellectual assault on the pernicious and deeply unscientific notion that LSAT scores could be used as predictors of future bar passage rates:

Is the use of an LSAT score for any purpose other than law school admissions proper?

Unequivocally, no. The LSAC’s cautionary policies say “[t]he LSAT was designed to serve admissions functions only. It has not been validated for any other purpose.” How much clearer can it be?

Jimmy: Dean LeDuc, I have a crazy friend who says that low LSAT scores correlate with low bar passage rates. Is he crazy?

Dean LeDuc: No Jimmy, just ignorant!

Those asserting that an individual will be unable or unlikely to pass a bar examination because that person’s LSAT score is below a certain level should be held to account. The LSAC has declared that the LSAT has not been validated as a predictor of future bar results. Anyone claiming that there is a relationship between an LSAT score and bar passage should be called to account and required to provide supporting evidence. And the burden should be on the person making the assertion, since the LSAC cautionary policy has already established that the LSAT has not been validated for that purpose.

Hey kids, let’s do a Scientific Study of this extremely complex issue.

First, let us select two law schools at random. Let us compare the bar passage performance of the graduates of the nation’s second-ranked law school with that of graduates of the tenth-best school in the land:

Because the scientific method requires controlling for confounding variables, such as the relative difficulty of the bar examination in different states, we will use bar passage rates of graduates in the two states (New York and California) in which a statistically significant number of graduates of the two schools took the bar between 2011 and 2013:

Yale: 427 takers, 403 passed (94.3793911007258%)

Thomas Cooley: 330 takers, 138 passed (41.818181818181%)

Do these rates correlate with the LSAT scores of the graduates? This is a more difficult question to answer, as we must use the 25th, 50th and 75th percentile LSAT scores of matriculants at the two schools as a proxy for the LSAT scores of the individual bar examinees, which are unknown.

Cooley matriculants in the classes of 2008-10 had LSAT scores of 144, 146, and 150 at the cut points. These scores represent the 23rd, the 30th, and the 44th percentile of test takers respectively.

Yale matriculants in those classes had LSAT scores of 170, 173, and 176, representing the 98th, 99th, and 99.6th percentiles.

While it is true these numbers are suggestive of some sort of correlation between LSAT scores and bar passage rates, the Scientific Method requires considering alternative hypotheses.

For instance, we know nothing about the LSAT scores of matriculants above the 75th and below the 25th percentiles at the two schools. It is statistically possible that the Cooley graduates who took the New York and California bar examinations had LSAT scores that were higher than the Yale graduates who sat for those bars (the Cooley graduates who took those examinations represent less than 25% of the school’s graduates in those years).

It is also possible that Yale Law School is nothing but a straightforward three-year bar review course, while Cooley students fill up their time taking seminars on what the text of the 1964 Civil Rights Act would have looked like if it had been drafted by Schopenhauer and Jay-Z, after they had spent three weeks in a Mexico City hotel room drinking some cheap crap called choco and reading Finnegans Wake while listening to the White Album, which is to say that the pedagogic methods employed at the two schools could well explain all of the difference in bar passage rates, because as everyone should have learned in Statistics 101, correlation is not causation.

Teach the controversy!

Another sad story

[ 23 ] February 17, 2015 |

Now sit right back and you’ll hear a tale, a tale of a fateful trip.

Well, not really.

In the summer of 1995, Joel Seligman left his position on the University of Michigan law school faculty to become dean of the University of Arizona’s law school. I had dinner with him that fall at his new Tuscon home — it was my idea of a mansion — and went to an Arizona football game with him the next day. Seligman was pitching his new school, and he spoke of his hopes of getting a “transformational gift” from the father of someone who had just graduated.

His hopes were realized three years later, when James Rogers pledged the mind-boggling sum of $115 million to his own and his son’s alma mater. It was at the time by far the largest gift anyone had made to a law school.

When you have as much money as I do, you can’t spend it on yourself,” said Rogers, 60, owner of the Las Vegas-based Sunbelt Communications media empire. ”After investing in your own business, giving money to education is the best investment you can make. If everybody did what I did, we would be the best educated people in the world.” . . .

The main objective of Rogers’ gift is to hold down the cost of attending the law school, while bolstering its faculty with more top-level legal scholars, said Joel Seligman, UA law school dean.

UA is 40th among American law schools, according to U.S. News & World Report’s 1998 ratings.

Its tuition – $4,538 per year for Arizona residents and $11,490 for non-residents – is among the five lowest of the top 50 law schools.

”We’ll soon have the lowest tuition in the top 50. We’ll be the best value in legal education,” said Seligman, who announced yesterday that he plans to step down.

How’d that work out?

It worked out great for Seligman, who parlayed his fund-raising coup into the deanship at Washington University St. Louis’s law school, and from there to the presidency of the University of Rochester, where three years ago his compensation was just under one million per year.

It worked out nicely for Rogers, who got the law school named for him (“look on my works, ye mighty, and despair!”), and then went on to be appointed the chancellor of the entire Nevada university system, although his four-decade-long post-law student background in higher education consisted solely of having given immense piles of cash to various institutions. (BTW Rogers made his fortune the old-fashioned way, by acquiring property rights in the enormous income stream generated by a government-created and protected monopoly, in the form television broadcasting licenses).

As for future law students at the University of Arizona, who were supposed to benefit from Rogers’ largesse in the form of cheap tuition and increased institutional pre$tige . . .

Amazingly (this is a rhetorical device, there’s really nothing surprising about it) resident tuition began to skyrocket at the law school almost before the ink was dry on Rogers’ gift, doubling over the next five years, and then doubling again in the next five after that, so that by 2009 it had risen from $4,538 to $20,895. Non-resident tuition also went through the roof, albeit not quite as quickly in percentage terms, rising from $11,490 to $35,807.

2008 and 2009 were the years of the Great Recession, so the university’s administrators decided to give students a break by . . . raising tuition even faster, so that by 2012 resident tuition was $27,272 — six times higher than thirteen years earlier, when Rogers made the largest gift in the history of American law schools in order to keep tuition at the school affordable — while raising non-resident tuition to a cool $42,283.

What did all this activity do to the law school’s revenue streams? Well in 1998 the school was generating about $2.5 million per year from tuition along with another few hundred thousand in gift income.

By 2012, massive tuition hikes, along Rogers’ gifts and those of others (he gave $50 million over 20 years, along $15 million in matching gifts to those from other donors, and he left a $50 million endowment bequest in his estate), had increased the school’s annual revenue from tuition and gifts alone to around $15 million.

Of course the other intended effect from the opening up this immense faucet — really more of a water-cannon — of cash flow was that it would rocket the law school toward the top of the national rankings:

Yale, Stanford, Harvard and . . . Arizona?

Communications mogul James E. Rogers hopes the University of Arizona will be mentioned among those elite law schools after he more than doubled his gift to UA yesterday to $130 million.

”This will put Arizona’s law school on the map,” Rogers said yesterday. ”It will signal that it’s a law school on the move.”

Oh well.

Arizona’s ranking actually fell between 1998 and 2012, from 40 to 43, and it never rose higher than 38th at any point during these years. In effect the school’s ranking didn’t move at all, nor did the entrance qualifications of its students, or their bar passage rates, or really anything else that’s measurable, other than the school’s radically enhanced revenue stream, and its faculty-student ratio, which went from 14.2 to 10.5 to 1. (I suspect the school’s administrator to student ratio improved much more drastically, but that information isn’t publicly available).

What happened? Did the university’s central administration decide to use the income from Rogers’ gifts to replace some or all of the school’s share of the university’s state tax support? That’s possible, but note that, despite being in a very right-wing state, the University of Arizona’s state appropriations rose from $259 million in 1998 to $362 million in 2007 and $464 million in 2012. So if the university was cutting the law school’s tax subsidy, it was doing so in a context in which the university’s overall subsidy was growing — which would have been a very audacious move, given that $50 million of Rogers’ gift was in the form of a bequest, and could thus be revoked by him at any time. (He died last summer).

In any case, the massive increase in the school’s operating budget, enabled by the combination of radical tuition hikes and Rogers’ gifts, resulted in nothing tangible for the school’s students beyond greatly increased debt loads that averaged, with accrued interest, more than $100,000 in 2013.

Indeed, reacting to plunging applicant numbers, in 2013 Arizona became the first ABA law school in memory to actually cut tuition, from $27,292 to $24,396 for residents, and from $42,902 to $38,856 for non-residents. This apparently didn’t move the needle much, at least in regard to non-residents, as the school slashed non-resident tuition by 30% last spring.

Anyway, this series of events illustrates nicely how empty the administrative rationale is that law schools, at least, have to constantly jack up tuition and grovel before robber barons in order to “compete” in the “rankings.” It also illustrates how little of what is called “affordability” by higher ed administrators has to do with the degree to which higher ed costs are subsidized, since more money just means more spending, at least until the marks customers students actually start to rebel.

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