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Tuesday, November 12, 2013

80%-85% of ABA-Accredited Law Schools Are Losing Money

Paul Campos (Colorado), 80% to 85% of ABA Law Schools Are Currently Losing Money:

Over the past few months I’ve studied the current operating budgets of a representative sample of the nation’s 202 ABA-accredited law schools. ...

I acquired these budgets via various routes, including asking schools for them, open records requests, tax filings, and private communications with individuals. Law school budgets are somewhat arcane documents, both because each school has its own accounting , and because most schools are located within universities. The latter fact creates various complexities in regard to measuring what are known in the business as “indirect expenses” — that is, university-wide operating expenses that must be distributed among the institution’s various schools and colleges. ...

My survey of law school budgets suggests that, on average, law school revenues will be down this fiscal year by about 15% in real terms from where they were three years ago. Costs, meanwhile, have not decreased by the same amount — if anything, they are slightly higher (as of now the rankings struggle continues unabated). Very few law schools were running 15% operating surpluses three years ago, which means that the large majority of law schools — I estimate between 80% and 85% — are incurring significant operating deficits in the present fiscal year.

Update

Above the Law, The Law School Bubble Is Bursting: Over 80% of Law Schools Estimated to be Operating at a Loss:

Do you hear that sound? It’s the sound of music stopping. It’s the sound of a tap running dry. Law schools are living in an F. Scott Fitzgerald novel, and the party is wrapping up.

ABA Journal, A Pyramid Collapse for Law Schools? Most Are Losing Money This Year, Law Prof Says:

Campos drew his conclusion after studying the budgets of 31 ABA-approved law schools, 23 of them private and eight of them public, he says in the comments section to his article. He obtained the budgets various ways, including requests to the schools or through open records laws, tax filings and conversations with private individuals. 

http://taxprof.typepad.com/taxprof_blog/2013/11/80-85-.html

Legal Education | Permalink

Comments

This is one of those analyses that has a big headline number that will be quoted a lot. I think no one would probably dispute it if someone said "a lot of schools are running deficits this year." But to put a figure on it like "80%-85%" without showing your work is problematic, as no one can double check the research behind it. This seems more "truthiness" than "truth."

Posted by: Butsee | Nov 12, 2013 1:18:08 PM

Paul, how could you post this absent any evidence? Campos is a charlatan, not a reliable source!

Posted by: Brian | Nov 12, 2013 7:20:13 PM

Apparently law professors see sampling and data transparency problems much more easily when the thesis is "80-85% of law schools are losing money," instead of something like "A law degree is worth a million dollars, on average."

Posted by: Morse Code for J | Nov 12, 2013 10:36:44 PM

This is news?

Posted by: michael livingston | Nov 13, 2013 5:02:37 AM

Close all the law schools except the T20, and the public flagships that do not fall within the T20 (six of which are public).

Anyone who spends $250-300,000 to attend any school below that level is a naive fool.

Posted by: CatoRenasci | Nov 13, 2013 7:50:45 AM

Margin Call:

John Tuld: So, what you're telling me, is that the music is about to stop, and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism.
Peter Sullivan: Sir, I not sure that I would put it that way, but let me clarify using your analogy. What this model shows is the music, so to speak, just slowing. If the music were to stop, as you put it, then this model wouldn't even be close to that scenario. It would be considerably worse.
John Tuld: Let me tell you something, Mr. Sullivan. Do you care to know why I'm in this chair with you all? I mean, why I earn the big bucks.
Peter Sullivan: Yes.
John Tuld: I'm here for one reason and one reason alone. I'm hear to guess what the music might do a week, a month, a year from now. That's it. Nothing more. And standing here tonight, I'm afraid that I don't hear - a - thing. Just... silence.

Posted by: terry malloy | Nov 13, 2013 8:39:36 AM

I would estimate that 63% of the statistics cited by Professor Campos are just made up.

Posted by: Kimb | Nov 13, 2013 8:55:43 AM

Morse Code for J's answer is the credited response.

Posted by: Bobby Dobb | Nov 13, 2013 10:10:18 AM

Campos isn't alone in stating that most law schools are running deficits. Professor Paula Marie Young recently noted that in a speech given at the Midwest Association of Pre-law Advisors, Kent Syverud, Dean of WUSTL Law School, stated that 175 of 202 law schools are operating at a substantial deficit. That makes two charlatans, I guess.

See The Faculty Lounge : http://www.thefacultylounge.org/2013/10/law-school-applicant-pool-likely-to-slide-further.html#comments Scroll down twenty or so comments.

Posted by: slobodan | Nov 13, 2013 10:30:41 AM

Agreed, Morse Code for J hit it out of the park.

Posted by: Jobs | Nov 13, 2013 10:52:49 AM

“Kent Syverud, Dean of WUSTL Law School, stated that 175 of 202 law schools are operating at a substantial deficit. That makes two charlatans, I guess.”

Syverud also suggested that the downturn in law school applications has considerable historical precedent, and is therefore likely cyclical, and not structural. I gather, then, that he is only not a charlatan when he supports the pet idees fixes of the law school seamster crowd.

“Morse Code for J hit it out of the park.”

Only if the park is Little League sized. Comparing Campos’s use of statistics to the sophisticated methods employed by Simkovic and McIntyre is patently ludicrous.

Posted by: Alan A. | Nov 13, 2013 11:56:18 AM

Comparing Campos’s use of statistics to the sophistry employed by Simkovic and McIntyre is patently ludicrous.

Fixed that for you.

Posted by: Unemployed Northeastern | Nov 13, 2013 1:09:38 PM

The comparison is between law professors' (at least, law professors on a certain side of the issue) wholesale acceptance of a study with significant methodological problems in the context of a "$1 million law degree," while pointing to flaws in Campos' analysis. Whether or not the study was more "sophisticated," the comparison is still valid.

Posted by: Jobs | Nov 13, 2013 1:41:02 PM

Alan A.

Since you agree that Syverud is not a charlatan, surely you agree with him that law school professor salaries should be cut in half?

"Law professors and law deans are paid too much," said Kent Syverud, dean of Washington University School of Law in St. Louis, told the ABA's task force on the future of legal education. "Either we have to be paid less, or we have to do more…. The whole problem of costs probably would go away if our salaries were halved."

http://gawker.com/recession-finally-reaches-law-school-professors-1111820206

Posted by: D++ | Nov 13, 2013 2:06:14 PM

I wondered how the law faculty find time to write their important scholarly articles with all the fiddling they must do amid the flames.

Posted by: Bobby Dobb | Nov 13, 2013 2:18:35 PM

Campos gives us enough info to know that he's just doing a rough estimate. And while Simkovic and McIntyre use sophisticated methods for their historical analysis, their assertion that the future will mirror the prior 15 years is a leap of faith.

Posted by: anon | Nov 13, 2013 2:18:49 PM

Yeah regardless of what the final numbers are, it's pretty clear that the conclusion is correct: A lot of these schools are going to be in big financial trouble. It seems like a new one opens every month...

Posted by: Dave Stevens | Nov 13, 2013 10:09:37 PM

Actually, Simkovic & McIntyre are just assuming that the future won't be 85 to 95 percent different from the past.
http://leiterlawschool.typepad.com/leiter/2013/07/brian-tamanahas-straw-men-part-4-we-would-have-to-be-off-by-85-percent-for-our-basic-conclusion-to-b.html

Seems like a pretty reasonable assumption.

Posted by: Anon | Nov 14, 2013 8:19:52 AM

Actually, quite a few law professors had questions about Simkovic & McIntyre's data and methods. S&M answered those questions:

http://www.concurringopinions.com/archives/author/michael-simkovic

http://leiterlawschool.typepad.com/leiter/guest-blogger-michael-simkovic/

Posted by: Meh | Nov 14, 2013 8:28:25 AM

And those "answers" were in turn answered:

http://lawschooltuitionbubble.wordpress.com/2013/09/09/economic-value-paper-a-mistrial-at-best/

Of course, it was a small minority of professors, those on one side of the issue, that had questions; the rest just swallowed it whole.

Posted by: Jobs | Nov 14, 2013 9:52:42 AM