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Saturday, April 21, 2012

Tamanaha: What Is Going on at the LSAC?

LSACFollowing up on Thursday's post, LSAC Jacks Up Fees 15-31% to Students in Light of Decline in LSAT Test Takers:  Balkinization, What is Going On at Law School Admission Council (LSAC)?, by Brian Tamanaha (Washington U.):

When a business is faced with declining demand, the usual course is to cut price (and reduce expenses), but LSAC is doing the opposite. LSAC is not a "business," of course. It is a non-profit organization that was created by law schools to administer the LSAT--with equal voting shares held by every ABA accredited law school. It doesn't need to cut price because it holds a monopoly, and the decline is not owing to the price of its service but to a dampening of interest in attending law school. There is no point in cutting price, they probably reason, because that won't lead to more applicants.

That's true enough, but it still doesn't explain why fee hikes are necessary given that LSAC is sitting on nearly $200 million in assets, and revenues exceed expenses.

Here is another curiosity: the officers of this non-profit are extremely well compensated. In 2009, the President earned $635,000 (with what looks like a $200,000 forgivable loan upon hiring)--compared to the previous president who earned $442,000 in 2007. The next highest officers earned $375,000, $322,800, $299,2000, $282,000, $252,500, $237,400, $231,912, and so on. In 2008, the four highest officers below the President also received one time supplemental payments of $100,000, $100,000, $85,000, and $70,000.

This a lot of money to pay people for what amounts to running a money machine. They do not engage in any fundraising. Their income stream is unrelated to anything they do: revenue goes up when more people apply to law school and goes down with the reverse.

I have previously raised questions about LSAC and its role in connection with law schools. There is no doubt that it can provide a much better service--in particular by supplying the ABA the data on LSAT and GPA medians for every law school. It has this information in its data bank and providing this directly to the ABA would avoid errors as well as false reporting.

Law schools elect the Board of Trustees that oversees LSAC. It is time to elect people who will take a hard look at its operation. What are LSAC's priorities? Why is it amassing a huge pile of money? Why is it raising fees when it is not losing money? Why are the officers paid so much? Why is there a general counsel and assistant general counsel, with a combined salary of half a million dollars, along with legal fees to outside law firms totaling another half a million dollars? Why is a million dollars spent each year on lobbying? Why does LSAC pay for "guests" to accompany staff members to two board meetings a year? ...

I am not saying that there is anything wrong with LSAC. There may be good answers to all of this. But it doesn't hurt to ask.

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