Paul L. Caron

Friday, June 22, 2018

University Of Minnesota Approves $3.6 Million Subsidy For Law School; Regent Urges School To Drop Quest To Retain Top 20 Ranking Due To Projected $100 Million 10-Year Subsidy

Minnesota LogoFollowing up on my previous post, University Of Minnesota Law School Seeks $3.6 Million Increase In Subsidy To Maintain Top 20 Ranking:  Minnesota Lawyer,  U of M Regents Subsidize Law School For Another Year:

The University of Minnesota Board of Regents has approved a funding plan that will subsidize the U of M Law School next year with provisional funding for the subsequent two years.

On June 8, the regents approved U of M President Eric Kaler’s proposal to provide $3.6 million to cover a projected deficit for fiscal year 2019—a one-time infusion of $1.9 million along with a $1.7-million increase in its annual appropriations. The proposal calls for two subsequent years of subsidies dependent on the provision of satisfactory metrics by the school that will allow the regents to assess performance. The plan’s goal is to both maintain the law school’s high national ranking and eliminate the school’s annual deficits by 2022.

Like most law schools, the U of M has been dealing with steeply declining applications and enrollment since about 2010. Since 2013, the school has been coming to the regents to request subsidies, which have totaled about $17 million since then. Law school Dean Garry W. Jenkins has reported that applications and tuition dollars are now modestly increasing for the first time in years, but that the subsidies are still necessary.

In a full budget report to the board’s Finance and Operations Committee, Kaler outlined a threefold reason for the law school’s budgetary problems of recent years: In line with national trends, the school has seen a sharp decline in enrollment, an increase in scholarship expenses to continue to attract high-quality students, and an inability to reduce expenditures to make up for the loss in tuition revenues.

Meanwhile, the school has enjoyed high rankings by U.S. News and World Report—it was recently ranked 20th of 194 laws in the country—and Jenkins and others contend that the subsidies are necessary to restore the school’s financial footing and maintain its national stature.

Some members of the Finance and Operations Committee, however, express a belief that the support of the law school may be harming the university as a whole.

Regent Michael Hsu, speaking at a June 7 meeting of the Finance and Operations Committee, said he had conducted his own analysis and found that adding up “all the subsidies that have been given to the law school since 2014, the number today is around $40 million.” Extrapolating forward, he concluded that at the 10-year mark, in 2023, the number could approach $100 million.

Hsu suggested that the school needs to drop its admission standards, attract more students, and not place as much emphasis on the rankings. ...

Regent Dean Johnson said he believes that “the cost of faculty is too expensive for the number of students and the degrees which we offer,” and suggested that one answer could be to offer inducements for faculty to leave. Responding to that suggestion, Kaler said it was his understanding that labor laws prohibit limiting such incentives to one class of employee.

The Finance and Operations Committee had met on May 10 with Jenkins, Kaler, and Provost Karen Hanson to discuss the law school’s financial situation. According to the minutes of that meeting, Jenkins recommended against increasing class size and letting the rankings fall, arguing that students from other Midwestern states with law schools that rank lower than the University of Minnesota are choosing the U of M despite higher tuition costs.

Speaking at the June 7 meeting, Board of Regents Chair David J. McMillan said there was agreement at the earlier meeting that the law school is an important part of the university but that the subsidies can’t continue, “and the board has to evaluate when that needs to happen.”

Kaler’s proposal to provide funding for 2019 and provisional funding for the next two years—which McMillan offered as a budget amendment and which the committee then unanimously approved—aspires to do that. The proposal also calls for increased enrollment and tuition, increased philanthropy and further spending reductions and reallocations within the law school.

McMillan explained that the action calls upon the university administration “to come up with some metrics around which they can evaluate and then recommend to us so we can evaluate whether or not to continue this investment in years two and three.” The metrics are due in September, with a report due in February for evaluation.

”We can’t continue this much longer,” McMillan said. “It’s extremely expensive for the rest of the university, but we’ve made the investment to date and I don’t want to just pull it up and throw it in the ditch at this point. I would like to see us move forward in a more disciplined and structured manner.”

Update #1:  Brian Leiter (Chicago), The Continuing University Subsidy of the U of Minnesota Law School:

That the flagship law school, long one of the top twenty in the United States, should still be facing these difficulties is sobering. And, of course, since runs American legal education, the school faces a stark choice: lower admissions standards (and scholarship offers) to take more paying students with lesser numerical credentials, and the school's rank will drop; if the school's rank drops, some number of out-of-state students who might have paid to go there, won't, and the cycle will continue.

Update #2:  Minnesota Associate Dean Tells The Story Behind The Media Coverage Of The Law School's Budget Challenges

Prior TaxProf Blog coverage:

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In other words, the university can't afford the law faculty's (purported) wage premium. It's the legal profession in a nutshell, folks. And if the #20 law school in USNWR needs $100 million in life support over ten years, you can rest assured that most law schools have similarly dire financials.

Posted by: Unemployed Northeastern | Jun 22, 2018 8:22:16 AM

While there have been challenges here at Minnesota, readers should know that the recent media coverage you cite doesn't include the whole story.

First, of the 11 public law schools in the top 30, the only ones to get a lower percentage of their revenue from state support are Berkeley, Michigan, and Virginia -- all with endowments 2 to 4 times larger than ours. The so-called "subsidy" is actually bringing us into line with our peers.

Second, our applicant numbers, yield, and class size have all increased significantly for the entering classes of 2017 and 2018, without any sacrifice in the credentials of our incoming students.

All law schools need to be conscious of costs today, and we're no exception. But there's no dire crisis at Minnesota, even if that's a less interesting news story.

Posted by: WIlliam McGeveran | Jun 22, 2018 1:28:08 PM

Or maybe in the world of email and telephone and the fax machine and cheap flights, people would rather go to university somewhere warmer than Minnesota.

Posted by: Minn | Jun 23, 2018 7:02:26 AM

Pertinent numbers from the 2011 and 2017 U. Minn ABA Form 509 disclosures:

2011: 3,546
2017: 1,808

Median LSAT & uGPA:
2011: 167, 3.8
2017: 163, 3.75

Total number of students:
2011: 752
2017: 577

Percentage of students receiving tuition discounts:
2011: 65.8%
2017: 84%

Median grant:
2011: $15k/year
2017: $25k/year

Posted by: Unemployed Northeastern | Jun 23, 2018 1:43:45 PM

so typical of UNE to not let facts stand in the way of his obsession with law schools.

Posted by: anon | Jun 23, 2018 6:40:10 PM

Yes anon, I'm sure the big driver of U.Minn Law's budget is the electric bill. Or maybe those darn Wexis subscriptions. Certainly can't be the payroll; after all those noble faculty all would be earning, what, $65 squabillion dollars as equity partners at Vault 3 firms? I keep forgetting how large the Scrooge McDuck-sized vaults of cash are that these people passed over to be law professors after their first year in Biglaw.

Let's see: several years ago the faculty payroll was just shy of $13 million. That excludes non-faculty payroll. But sure, it's probably the cost of snow removal that put them in the red.

Posted by: Unemployed Northeastern | Jun 23, 2018 11:57:36 PM