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Pepperdine University School of Law

Friday, May 13, 2016

NY Times:  Amidst 33% Enrollment Decline (From 260 1Ls To 174), University Of Minnesota Funds $16 Million Law School Operating Deficit

Minnesota LogoFollowing up on my previous post:  New York Times, Minnesota Law School, Facing Waning Interest, Cuts Admissions:

Resisting the temptation to admit more students to bolster tuition receipts, the University of Minnesota, which has one of the nation’s highly ranked law schools, has gone in the opposite direction. It decided to shrink enrollment, and take in less tuition income, to preserve its national standing as a top law school. It did this even as some argued for broader inclusion of students who would fall outside the school’s admissions parameters.

During Mr. Wippman’s tenure, Minnesota has gradually admitted fewer students, shrinking its first-year class to only 174 in the 2015 academic year from more than 250 a few years ago. It offset the sharp loss in tuition income with more public subsidies, which in Minnesota are decided by a Board of Regents.

Minnesota’s law school has closed its deficits with university money — expected to total $16.1 million through 2018 — according to university officials. ...

As it revamped its enrollment, Minnesota’s national ranking slid two places this year, to No. 22, a slot it shares with the law schools at Emory University and Notre Dame. Applications for the fall are flat. More worrisome is that Minnesota in recent years has had one of the largest declines in applicants among the top 20 law schools, but no one knows exactly why. ...

In the Great Lakes and Midwest region, the dire outlook for legal education has been magnified by the sheer number of accredited law schools. Minnesota and Indiana each have four, and Ohio has nine. The region’s rapidly aging population and the loss of its traditional manufacturing activity have eroded an economic base that could support a “strongly upwardly mobile middle class of the kind that sustains high-level educational activity,” David Barnhizer, a professor emeritus at Cleveland-Marshall College of Law, wrote in a March research paper. “Virtually all law schools across the U.S. pumped too many lawyers into a system that was already filled to the brim and now is overflowing,” Mr. Barnhizer said in an interview.

As the number of applications shrank, Mr. Wippman had to decide whether to admit those whose law school admission test scores and grade point averages were lower than Minnesota’s traditional standards. The success of such students can be riskier. A surplus of graduates who do not find jobs can eviscerate a law school’s reputation.

Raising tuition was not much of an option in an era when students are wary of taking on high debt, Mr. Wippman said. Dismissing faculty, especially those who are tenured, is difficult. And Minnesota’s law school has hometown competition, including the William Mitchell College of Law and the Hamline University School of Law, which recently merged. There is also St. Thomas Law School in Minneapolis-St. Paul. ...

[S]trong supporters in the local legal community include the former Vice President Walter Mondale, an alumnus and a senior counsel at Dorsey & Whitney, a major Minneapolis law firm. Mr. Mondale actively backs the school – the dean’s office is in Mondale Hall — but even efforts like a recent $73 million fund-raising campaign cannot sustain a law school with a $54.8 million annual budget. ... “People are turned off on legal education because of a lack of suitable paying jobs,” Mr. Mondale said. “I don’t think you can underestimate the havoc that these law school debts can cause.” ...

The execution of Mr. Wippman’s strategies will fall to his successor, who was named on Thursday. It will be Garry W. Jenkins, a law professor from Ohio State University Moritz College of Law.

http://taxprof.typepad.com/taxprof_blog/2016/05/ny-timesamidst-32-enrollment-decline-from-260-1ls-to-174-university-of-minnesota-funds-16-million-la.html

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Comments

The sad thing is that U Minn should be one of the survivors and thrives here. There is no good reason for Mitchell-hamline to exist, or for so many other expensive, subpar privates in saturated markets. (Eg, Suffolk, Pace, Northeastern, the Loyolas, Catholic, etc).

Cut the loan spigot off and let the correction happen already!

Posted by: anon | May 13, 2016 4:58:07 AM

Does a law school the size of U Minn really have a $54 million budget? I thought it would be more like $25-30 million.

If the average school has a $40+ million dollar budget than tons of schools must be running major annual deficits.

Posted by: JM | May 13, 2016 6:30:37 AM

@Anon,

Suffolk the university is in the middle of a pretty grim existential crisis. Bond debt that is more than twice the endowment and rated just a few ticks above junk status, maximum annual debt service that accounts for 1 dollar in 8 out in the operating budget, student tuition is ~95% of university revenue, they are on their fifth president in five years and she's already announced when she'll step down, the board's in turmoil, etc. That the law school is too expensive and has horrible job placement is almost beside the point now.

As for Northeastern, it actually shut down for nearly two decades in the mid 20th century, so they might have some notes on how they could do it again.

Posted by: Unemployed Northeastern | May 13, 2016 7:40:13 AM

Either that $54 million figure is wrong or somehow artificially inflated compared to their real-world operating budget, or it's accurate and is therefore the source of their current fiscal problems.

$54 million is about double the budget of the schools with which I'm familiar.

Posted by: Anonprof | May 13, 2016 7:59:19 AM

Law schools, even decent ones like my school and U or M have entered a vicious cycle. Because thousands and thousands of lawyers just like me aren't doing very well, the message gets out and declining enrollment is the result. Why aren't we doing better? Because the pie of legal fees, clients, work is only so big and there is not enough to sustain middle class income due to grotesque oversaturation of the market. There are about 100 rank not published law schools that have oversaturated the market and caused a glut. There are attorneys and law schools on every corner today. If the market were better, that would attract the students. A law school education would speak for itself.

Posted by: Captain Hruska Carswell, Continuance King | May 13, 2016 9:42:40 AM

Bottom line, when "I" do better, law schools will do better. Like it or not, "we" are interconnected. Perhaps inter-dependent? Success attracts success.

Posted by: Captain Hruska Carswell, Continuance King | May 13, 2016 9:45:40 AM

You can always count on the NY Times to take baseless jabs at law schools.

"In the Great Lakes and Midwest region, the *dire* outlook for legal education has been magnified by the *sheer* number of accredited law schools. Minnesota and Indiana each have four, and Ohio has nine. The region’s rapidly aging population and the loss of its traditional manufacturing activity have eroded an economic base that could support a “strongly upwardly mobile middle class of the kind that sustains high-level educational activity,” David Barnhizer, a professor emeritus at Cleveland-Marshall College of Law, wrote in a March research paper.

“Virtually all law schools across the U.S. pumped too many lawyers into a system that was already filled to the brim and now is overflowing,” Mr. Barnhizer said in an interview.

He warned that the region’s lesser-ranked law schools – he did not include Minnesota in that group – will “simply wither away” as fewer students seek admission.

Proof yet again that if you publish crap research but tell biased journalists what they want to hear, they'll lap it up.

Posted by: NY Times | May 13, 2016 10:58:17 AM

If there is any significant change in the ability of law students to borrow to fund a vastly overpriced legal education the "market" will resolve the situation. Whatever we say about what prospective students should understand about the legal job market the reality is that their combination of: 1. naivete, 2. lack of financial understanding, 3. the incurring of educational debt from their undergraduate periods, 4. the human ability to rationalize and avoid making hard and realistic decisions, and 5. the fact that they get to act like adolescents for another four years in law school with the prayer that conditions will improve or they will be the positive exception to the ranks of the unemployed or underemployed law graduate means that law students are seduced into massive debt they would not incur if the amount that could be borrowed was less and/or the criteria more stringent. If that occurs many law schools will disappear overnight. Enrollments would further plummet, for-profits would go bankrupt, tuition would drop by 50% or more, and tenure would be eliminated at many schools in whole or part. In other words, things could (and probably should) get a lot worse than they are right now.

Posted by: David | May 13, 2016 1:33:06 PM

David, schools are not going to go through bankruptcy (and are unlikely to close in large numbers). They are also unlikely to get 50% cheaper. See here for some thoughts on why: http://www.creditslips.org/creditslips/BrucknerAuthor.html. They are likely to "linger", cutting costs (and potentially quality) while searching for additional revenue streams.

Yes, if the world were a different place, the things you say might happen. But it's not. So let's work with the facts of the world as it currently is.

Posted by: Matthew Bruckner | May 13, 2016 2:04:13 PM

@David,

Access to exorbitant student lending will likely always be available to law students. Let us not forget that GradPLUS has only been around since 2006 and law school wasn't exactly free in 2005. Plenty of private law schools cost in the realm of $50k to $60k before 2006, and students could only borrow about $20k in federal student loans at that time... If GradPLUS were yanked, private lenders, including the one owned by the law schools themselves (because of course they would own a private student lender!) will fill in the gap immediately. Nondischargeability + securitzation = why not lend obscene amounts of money to anyone going to any law school? The only way to lower law school tuition is to have an outside force - the ABA, state bar associations, the feds, whomever - make them lower tuition. To wit, law school tuition growth far outpaced undergrad tuition growth through the 1980s, 1990s, and 2000s, and unlimited federal student loans were only available for the last four years of that period.

Posted by: Unemployed Northeastern | May 13, 2016 2:10:36 PM

"NY Times" fulminates at obvious truths. News flash: since the ABA mandated more comprehensive employment disclosure outcomes starting with the class of 2011, law schools haven't yet been able to muster 60% of their grads into full-time, long-term, license-required jobs. Is this the sign of a) a law school grad shortage or b) a law school grad surfeit?

Posted by: Unemployed Northeastern | May 13, 2016 2:13:35 PM

The "NY Times" poster is funny, in obvious denial, hiding behind anonymity and rationalizing for his or her preferred view of the world. I do agree with another poster that law schools will tend to linger and have already said that they are declining in quality in numerous instances. The "bankruptcy" thing may be formal or it may be an increasing refusal of universities to subsidize expensive law school models at a time when the universities are also under significant financial pressure. The federal loan program is something about which some thought is occurring and it is quite difficult in a highly saturated market for lawyer employment to justify retaining the loan program in its present form. For university law schools I think one probable solution is going to be a shift to non-tenure track and contract faculty who will be cheaper and also can be "cut loose". As to "crap" scholarship please take a look at the actual paper and see that it is based on very specific data. Then "Ersatz NY Times" should feel free to critique to heart's content.

Competitive Data Trends for Great Lakes and Midwest Law Schools 2012-2015
Cleveland-Marshall Legal Studies Paper No. 294
David Barnhizer
Cleveland-Marshall College of Law, Cleveland State University
Date Posted: March 10, 2016

Posted by: David | May 13, 2016 6:41:35 PM

UM has a reputation for political correctness that likely contributed to its ongoing tailspin

Posted by: mike livingston | May 14, 2016 3:02:38 AM

At my school, the graduating class in 2008 had about 360 students. In 2015, the entering class was just 201.

Posted by: Mark | May 14, 2016 3:53:28 PM

Minnesota is home to three law schools since Hamline and William Mitchell recently merged (or more accurately, Hamline was bailed out).

Posted by: Skip | May 14, 2016 3:59:06 PM

And yet the country is begging for more engineers... I'd like to retire, but there's no one to replace me... We're very near the point where we couldn't repair our infrastructure, even if we could afford it... However, whenever I turn on the TV I see a slew of "Ambulance Chasers" promising me a gazillion dollars if I would only give them a call.

Posted by: Osopardo | May 14, 2016 4:12:39 PM

@Osopardo,

For what it is worth, the US bestowed about 108,000 undergraduate engineering degrees in 2013-14 and another 47,000 masters' level degrees, versus about 42,000 new juris doctorates.

Posted by: Unemployed Northeastern | May 14, 2016 11:01:56 PM

Osopardo:

These television idiot lawyers on daytime television are an embarrassment to the profession. The guy with the cowboy hat promising SSi Disability takes the cake. Most attorneys practice law with quiet dignity and criminal attorneys represent the highest calling...asserting and protecting the Constitution for all of us.

Posted by: Captain Hruska Carswell, Continuance King | May 15, 2016 7:34:22 PM

Matt: Sorry, the reason schools don't close is not the bankruptcy laws. After all most law schools are constituent units within larger non profit entities, Their universities. so there is no reason to fear a Title IV issue for close of a unit within the university. The fundamental reason is that law schools largely continue to be profitable! They are still largely paying their tax rates to their parent universities and only in the red on their unit operating budgets.

And to Capt. Idiot: the reason you don't have work is because you are a fool or an impostor. The reason law school enrollment has suffered is because there are apparently better alternatives for bright students in the vastly improved wider economy.

Posted by: Anon | May 16, 2016 8:23:35 PM

Anon @8:23.

Yes, I agree. Sorry if my post suggested otherwise. When I blogged about this at Credit Slips a while back, I dug into Thomas Jefferson School of Law's finances and saw that they were still quite profitable (excluding debt service). Although bankruptcy isn't available to colleges as a method of debt reduction, their relatively homogenous creditor body understood the need for debt relief and worked out a deal that was in the best interests of both creditors and the law school. See http://www.creditslips.org/creditslips/2015/01/why-troubled-law-schools-may-remain-open.html.

Posted by: Matthew Bruckner | May 17, 2016 7:37:40 AM