For a couple of years now I’ve been engaged in an occasional correspondence with a Well Known Professor at a Well Known Law School. WKP, who has a background in finance, made the mistake of starting to inquire into WKLS’s balance sheet. Aware of my interest in the general subject, he passed on various numbers to me, as part of his attempt to get a handle on what was going on.
What was going on was that applications to WKLS had fallen sharply over the past few years, which in turn had led to significantly lower enrollment combined with significantly lower effective tuition (Effective tuition = sticker tuition minus discounts. WKLS raises its sticker tuition every year, as is commanded by Deuteronomy 28, but it has also massively increased its discounting, so actual per capita tuition is now quite a bit lower than it was).
After running the numbers through a Cray supercomputer, WKP concluded that getting less money per student while having fewer students added up to a lot less money overall. He then enriched his analysis by taking into account that WKLS had gone on a hiring spree over this same time, and thus its full-time faculty was now about 15% larger, while the school’s administrative staff had increased by an even greater percentage. He also analyzed changes in the school’s other source of significant income, gift income (expendable endowment income plus annual giving).
He observed that teaching loads at the school had declined dramatically, as the faculty-student ratio decreased, and lots of faculty members started operating “centers” for this and that, which required course relief (and also lots of new administrators, to help administrate the centers).
WKP: Doesn’t this all mean that we must be losing a lot of money?
WKP: How much would you say, roughly?
Me: Approximately a metric fuckton.
WKP: How long will the central administration let us keep doing this?
Me: Your guess is better than mine.
In the midst of these pleasantries, WKLS hired a new dean. The new dean came in promising to undertake various transformative changes, which would help transform WKLS from its perpetual Semi-Prestigious Status to a new Very Prestigious Status. Such changes included, principally, hiring even more faculty and opening even more centers.
Then one fine day, a year or so into his transformative regime, the dean discovered that the school was going broke. He informed the faculty of this, while at the same time expressing considerable pique that nobody had informed him before he took the job that the law school’s finances were in such bad shape. (This guy’s professional background is in — wait for it — corporate finance).
Me: Didn’t he ask to look at the books before he took the job?
Me: How about before he promised the faculty that he was going spend a whole lot more money to effectuate synergistic institutional transformations?
So now the faculty have the sads, and they’re also very mad at the dean for not telling them that if you bring in a lot less money but spend a lot more something bad could happen some day.
This is far from a unique tale. In fact one of legal academia’s charms is that it’s completely routine to put somebody who knows literally nothing about law school finances in charge of a law school’s finances. This in turn is based on the theory that Smart People don’t actually have to anything about something before being put in charge of it, because really how complicated could it be? (And a lot of central university administrators now get chosen in a similar way. As well as the CEOs of lots of big companies of course).
This is all going to end badly.