Chronicle of Higher Education: Law Schools Cut Back to Counter Tough Financial Times, by Katherine Mangan:
For years they were considered the cash cows of academe, spinning off profits that could keep money-losing parts of the university afloat.
But most law schools today are struggling to break even, buffeted by plummeting applications, a shrinking job market, and the constant pressure to avoid slipping in national rankings. ... Because they rely so heavily on tuition and face a variety of other cost pressures, many and possibly most of those schools are operating at a deficit.
The growing number of universities that are subsidizing struggling law schools "are certainly not happy about the money running the other way," said Paul F. Campos, a professor of law at the University of Colorado at Boulder whose biting critiques of law schools in blogs and books have made him a polarizing but influential figure in legal education. He estimates that at least 80 percent of law schools are losing money — a figure that an ABA spokesman said could not be confirmed.
"The attitude of a lot of the universities is, OK — we’re willing to carry you guys for a while, but you have to shed a lot of costs or come up with other sources of revenue because we’re not going to subsidize you forever," Mr. Campos said. ...
Among the highly ranked law schools now grappling with deficits, the University of Minnesota Law School [#22 in U.S. News] has received subsidies from the university that are expected to total $16 million by 2019, according to a report the law school presented to university regents in 2014, two years after the subsidies began. Faced with a 49-percent decline in applications from 2010 to 2015, the law school trimmed its enrollment by about a third of its 2010 level. ...
Another law school that is making tough financial decisions is Washington and Lee University's School of Law [#40 in U.S. News], which last year announced a transition plan that would allow it to shrink its first-year class, reduce faculty and staff positions through retirements and attrition, and tap into its portion of the university endowment. The goal was to balance its budget by 2018-19.
[Tax Prof] Brant J. Hellwig worked on the plan as a faculty member and took over as dean shortly after it was enacted last year. ... "I feel like we addressed the difficult questions early and head-on, and made the adjustments we needed to," he said.
As a small school at a private liberal-arts university, his was never a big moneymaker for the university. And some legal-education experts say it’s been a long time since law schools could be counted on to fork over big profits to their universities. ...
Universities often required law schools to hand over 25 percent or more of their revenues, a portion of which covered the cost of maintaining buildings and providing common administrative services. But the days when law schools had healthy coffers to raid have long since passed. The flow, in many cases, is going in the opposite direction. Some schools are having to shower incoming students with scholarships that take some of the financial pressure off of the students but dig the schools deeper into debt.
"When a law school loses money, you’re asking parents of undergraduates to subsidize six-figure law-school professors," said Dorothy A. Brown, a [tax] professor of law at Emory University. "That’s a hard sell."
She predicted that in the next three to five years, "some university is going to pull the plug and say, ‘Enough.’"
So why hasn’t that happened yet?
Prestige is one reason. Having a law school gives a university cachet that it’s reluctant to lose. Closing a law school would diminish the value of degrees earned by law graduates who serve on university boards and are often big donors.
No one wants to be the first to close a law school.
And some universities do believe that the enrollment decline has hit rock bottom. With many of their highest-paid professors nearing retirement and applicant pools showing hints of a recovery, some are cautiously optimistic that they’ll be at least breaking even soon.
In the meantime, they’re branching out. Many are expanding their LL.M. — an internationally recognized advanced law certification that provides lawyers with additional expertise in a specialized area.
Others, like Washington and Lee, hope that by shrinking their footprints and being upfront about their challenges, they’ll get back on solid financial ground. By posting the school’s transition plan on its website and involving faculty members, administrators, and alumni, "we’re conveying that we’re going to be fiscally responsible and financially sound going forward," Mr. Hellwig said. "That’s something that should matter to students."