Looking at the Law School ‘Crisis’ from the Perspective of the University

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I asked a friend, Geoffrey Mearns, what he considered to be the available options for law schools in this period of transformation. Mearns is my former law dean who bridges the worlds of public service, private practice and academia. Currently President of Northern Kentucky University, he is a very experienced and skilled lawyer who served as an Assistant US Attorney, including the Oklahoma City bombing prosecutions. During his diverse career he has been a partner in a large law firm specializing in representing clients under investigation for white-collar criminal offenses. He was also Provost of Cleveland State University after serving as law dean. His response to my question was as follows.

“I think there are more than two choices for a dean and a president and a provost.

1.       Pull the plug.

2.       Merge. (I guess that is one form of adaption, but it might just be superficial with no real programmatic change.)

3.       Truly adapt.

4.       Shuffle along with modest changes and probably an increasing need for central subsidy from the university.

5.       No change and manage a steady financial and probably reputational decline.”

 

We in the law schools have long been accustomed to dealing with our universities at “arms length.” In many instances this means we neither understand nor appreciate the fact that the university of which we are a part has its own interests, needs and agenda. Part of this subjective blindness that pervades law schools includes the fact that, just as with humanity in general we find it difficult and in some cases impossible to face the reality of our own institution’s potential “mortality.” At this point everyone is speculating about what is going to happen to US law schools and no one actually knows.

Even with the very large excess capacity represented by the number of law schools and graduates versus the available jobs it is unlikely that the number of closings of ABA accredited schools will exceed the predictions offered below by Matt Leichter, Jerry Organ and Brian Leiter. States with a single publicly funded “flagship” law school are unlikely to allow those institutions to “rot on the vine”. There are 24 Catholic law schools in the US and while as many as four or five of those schools could be in danger of “plug pulling” it is unlikely that the others will be endangered as opposed to having to engage in various degrees of “belt tightening.” But as many as 20 law schools could be closed in the near future and many others will be forced to adjust and adapt.

We too easily overlook the fact that law schools have been run at a profit and that in many situations law schools have funneled a significant amount of earnings into their parent universities. In business parlance law schools have been “cash cows” producing surplus revenues for their universities, even if those transfers have often been accompanied by accounting cost gimmicks that would have made Enron and Arthur Anderson proud.

The financial interests and responsibilities of the law schools and the universities that diverted surplus revenues from their law schools became almost completely disconnected from the legal profession and any consideration of the needs of a society. This was achieved “on the backs” of law students who were admitted into an extremely expensive educational system with the lure of high earnings, jobs and status even though the prospects of actually achieving those goals became steadily less likely for the majority of law students. To continue the parade of clichés, “the chickens have now come home to roost” for many law schools in the form of plummeting applications and downward cycling enrollments.

At the same time law school revenues are falling administrative costs are increasing. This includes recruiting students from the “thinning herd” of applicants, financial aid counseling, bar passage assistance as less well-prepared and lower credentialed applicants are brought in, marketing services aimed at “trumpeting” a law school’s quality, faculty and administrative salaries, health care and retirement costs, fundraising demands, and the critical activity of job placements for graduates. If the feeling of being “caught between a rock and a hard place” has emotive power it unquestionably describes the plight of a majority of US law schools. For some the pressure is relatively minor, but for an undetermined number of schools the intensity is steady increasing and will “crush” some.

The sometimes-maligned law school critic Paul Campos reports that 80 to 85 percent of American Bar Association accredited law schools are currently losing money [Campos, “80% to 85% of ABA law schools are currently losing money”, November 12, 2013]. The fact that Campos is resented does not mean that he is wrong. Matt Leichter observes that: “law schools’ budgets are being pulled down by both filled offices and empty seats, but so far the data say it’s more the former [faculty costs] than the latter.” Brian Leiter has predicted closings of as many as 10 ABA law schools. He explains: “Most vulnerable are going to be free-standing law schools that are relatively young.  Relatively young law schools [that are] part of universities … in vulnerable financial shape are also likely candidates.  … I expect more than 5% of current law schools, and probably more like 30-50%, will contract in various ways over the next decade.” [http://leiterlawschool.typepad.com/leiter/2012/10/predictions-about-closings-of-aba-accredited-law-schools-over-the-next-decade.html.]

Jerry Organ suggests it is possible that 10 percent of US law schools will close by 2019 [TaxProf, Tuesday, October 21, 2014]. That would represent at least 20 law schools and he is not including the odd mixture of law schools licensed solely by the California bar, including correspondence and distance learning “schools.” Organ’s analysis is based on what took place with dental schools several decades ago where once a highly regarded school of dentistry dared to “pull the plug” others responded in kind. If this does occur with law schools the “body count” could soar quickly once the taboo is broken and momentum begins to build. Universities would then initiate “programmatic triage” in ways that disfavor law schools as they shift, as Campos and Leichter indicate, from their favored status of “cash cows” to negative earnings programs in need of continuing university subsidies. Law schools will discover that everybody flatters the rich man and even laughs at dumb jokes until he loses his money and becomes an object of contempt.

As Leiter suggests, the most at risk institutions are the “stand alones”, the private “for profit” schools with investors and the new law schools that are part of more-or-less marginal universities that had hoped to ride the now ended “uptick” in law school attendance to create new revenue sources but now find they “birthed” an albatross. Along with these schools are ones, public and private, located in “lawyer surplus” areas with static or declining applicant and population bases. My best guess would be that 80 law schools are at some degree of risk. The risks will in many cases be managed by shrinkage, layoffs, mergers and consolidations, distance learning and computer-based instruction strategies, and by adoption of additional kinds of educational missions. Accessing new applicant pools that benefit from some modified forms of education in law while not seeking the right to practice in the traditional sense will also produce new versions of law schools or new components within schools. The changes will be exciting but for many they will be painful.

The ‘Legal Education Industry’ has Significant Excess Capacity

Just as the legal employment market is over-saturated due to the surplus numbers of graduates law schools pumped into the system over the past twenty years, the productive capacity of the law school “industry” is entirely out of balance with all foreseeable need for law graduates. Given the direction the traditional employment markets for lawyers are heading no more than 80-100 law schools could easily serve America’s need for new law graduates. With various projections of law employment (as we know it) put at 23,000 available positions annually (and quite possibly substantially lower) compared to the 45,000 that was the norm for a time, there is no need for 203 (ABA) fully accredited law schools, for another five provisionally accredited schools, or for the graduates of the numerous California non-ABA law schools approved by that state’s Bar, and another ten or so new or entirely unaccredited law schools. California by itself has an amazing number of law schools, 60 in total, with only five of the law schools public and fifty-five private, some with real universities and others that are either free standing or even existing primarily in electronic hyperspace. Taking all types of law schools together California is home to about 25 percent of the total number of institutions offering graduate education in law.

As law schools come under increasing pressure and applicants for their services continue to decline, traditionally structured institutions of legal education will lose the cachet provided by their lucrative expansion over the past forty years. Part of the continual pressure underlying the expansion was the schools’ ability to generate surplus “profits” for universities and, more recently, for investors such as in the InfiLaw system and the “California-only” law schools. Those “profits” have disappeared and we are entering a “what have you done for me lately” period where market realities will slam up against a heretofore insulated law school industry. University administrators and most investors operate with short-term memories and the pain of financial shortfalls is not long tolerated.

As long as law schools functioned as net revenue generators for universities they were treated with tolerance even if not being respected by other university academics. Those in other disciplines have long had a degree of skepticism about academic law as a supposed intellectual discipline. In their minds there is a clear distinction between a research and scholarly system whose purported scholarly contributions consist mainly of a mishmash of publications appearing in a vast array of student-run journals rather than through the vetting processes of peer-reviewed publications. There should be little doubt that, as many law schools now involuntarily shift into a negative budgetary mode of operation and increasingly require subsidies from universities that are cash-strapped and/or have higher priorities, then the “writing is on the wall” relative to how law schools are viewed. Like ship-of-the-line battleships some law schools will find themselves decommissioned.

The “Financial Well” is Getting Low

At this point law schools have pretty much “drained the well” through their irresponsible escalation of costs for potential students who now understand there is no “pot of gold” at the end of the law school “rainbow”. The rules that allowed law and other graduate students to borrow “to the hilt” from the Federal government and subsidized banks meant that law schools, universities and the professoriate could “milk” students in ways that allowed the dramatic escalation of tuition and faculty salaries well beyond any rational norm. Whether public or private, law schools could not resist the opportunity to “feed at the trough” comprised of federally subsidized student loans. They have voraciously fed “their habit” by greatly expanding the number of enrolled students and increasing tuition and fees—simply because they could. It is one of the worst examples of an “entitlement” system.

There is an irony in the fact that many law professors could read a recent article in the Los Angeles Times, “U.S. targets for-profit colleges that saddle students with high debt” where the charge is that they “leave students with too much debt compared with their earnings after graduation” and that many students have “massive loans and few job prospects”. The irony is in the fact that there is a failure to recognize that many law schools are engaged in similar activity. Regardless of the attempts by some deans and faculty to justify the situation, continual cost hikes by law schools that subsidized the expansion of faculty and staff and increased salaries have burdened young law graduates with the equivalent of a home mortgage. The ease with which young law students, the majority of whom lacked understanding of the impact of the high debt-loads they were incurring, could borrow to finance their education and living expenses through federally subsidized deferred borrowing allowed law schools to build an unaccountable system in which tuition could be increased without check—until now.

The Lawyer Surplus—State-by-State

Catherine Rampell reported in a 2011 New York Times article that “every state but Wisconsin and Nebraska (plus Washington, D.C.) is producing many more lawyers than it needs. [Catherine Rampell, “The Lawyer Surplus: State by State”, http://economix.blogs.nytimes.com/2011/06/27/the-lawyer-surplus-state-by-state/?_r=0].   Rampell based her conclusion on a computer model that examined a state’s bar passage numbers contrasted with available legal positions and covered the 2009-2015 period. The model indicated that New York had the highest annual surplus of bar passers to demand of 7,687 lawyers representing 9,787 2009 bar exam passers with only 2,100 estimated annual positions in the 2010-2015 period. California was next with an annual surplus of 2,951 lawyers based on 3,307 available positions and 6,258 bar passers. Texas was projected to have an annual surplus of 897 and Florida 795, with New Jersey at 2,193.

Of course projections and estimates are tricky but assuming these are in a legitimate “ballpark” the implications are dire. Remember we are dealing with “annual” figures of surplus. These five states are recording an annual surplus of 14,523 new lawyers who successfully passed the bar exam and for whom there apparently are no law jobs. Cumulatively, this represents a buildup of 72,615 surplus lawyers in those five states over the period, one that further exacerbates the problem for law schools and guarantees a “death spiral” for some. It is possible that new jobs could be created, although it is at least as likely that more traditional law positions are eliminated given technological labor saving advances that allow existing lawyers to “do more with less” and others that encourage non-lawyers to use “law apps” to do things that have heretofore been considered to be the sole province of licensed lawyers. Rampell’s numbers aren’t perfect but they don’t have to be to portray the fact of the significant oversupply of law graduates, an oversupply directly attributable to the irresponsible behavior of law schools.

Universities will ‘Pull the Plug’ Rather than Subsidize Law Schools’ Financial Losses

The truth is that law faculties and law deans have very limited control over what is going to occur at law schools. The ongoing “tinkering” with largely cosmetic curricular change that is claimed to significantly reform legal education is more public relations than substance. Minor curriculum adaptations are not going to “win the day” because the problems law schools and universities face go far deeper than curriculum. After decades of denying, ignoring and marginalizing educational (and research) orientations directed toward the needs of graduates entering the legal profession the idea that a majority of traditional law faculty members are suddenly committed to educating graduates to be more prepared to enter the practice of law is a combination of public relations announcements that re-label existing programs and teaching approaches that many clinical, professional responsibility and skills teachers have been doing for decades while being looked down on as intellectual inferiors by their doctrinal counterparts.

A dire method of dealing with the transformation is, as suggested above by Geoff Mearns, in the hands of the parent university. That option is to “pull the plug” by closing a law school entirely and discharging faculty and staff in toto. Given the difficulty involved in dealing with lawyers, including law professors as lawyers, it is quite possible that a surprising number of universities will ultimately conclude that closure is the cleanest, quickest, and most cost-effective solution to “what ails them”. Doing so avoids messy “for cause” legal battles over termination of individual faculty. Equally significant is that it also avoids a university needing to provide continuing subsidies to a law school on which it had previously relied for surplus dollars for university operations.

The pace and scale of closings will take a few years to evolve, but as it becomes obvious that enrollment in many law schools is not going to return in numbers that allow the schools to be profitable “cash cows” for universities the willingness of those parent institutions to spend significant funds to keep a school afloat is likely to disappear. Some of the effects will depend on whether a law school has a substantially solvent university with an endowment to provide backup support, if the law school has any significant endowment of its own, if the school is being operated for profit purposes for private investors, or whether there is any significant and stable financial backing from state subsidies.

University Graduation Numbers and a Shrinking Applicant ‘Supply Chain’

Public universities around the US are finding themselves faced with significant reductions in state subsidies as states confront their own shortfalls and other priority demands. Maine, Pennsylvania, Nevada, California, Washington and many other state systems are facing difficulties. For states such as Pennsylvania, Ohio, Michigan, New York and Wisconsin research data suggest that they are experiencing a decrease of 5 percent or more of public high school graduates in the 2008-2020 period. Declining birth rates, the number of people going to college and those actually graduating from four-year colleges and universities in the regions from which specific law schools draw applicants put states such as Ohio in trouble. Molly Bloom writes “Ohio Has Some of Lowest High School Graduation Rates in Midwest” (11/30/2012). The only state in the region with a lower rate is Michigan. Other states in the area expected to experience a decrease in high school graduates of less than 5 percent (but still a decrease) include West Virginia, Indiana, Illinois, Minnesota, Iowa and Missouri.

Some law schools are trapped within a declining applicant, economic and law job “over-saturation” area. The demographic supply chain that produces the pool of applicants for their services varies dramatically by the area of the country in which a law school is located. Critical factors include the traditional territorial “market” from which the law school draws applicants and the employment markets to which the majority of its graduates have access. Most law schools and their universities are dependent on relatively local student populations to satisfy their enrollment needs. The institutions draw most of their students from a predictably defined area comprised of a specific cluster of high schools if we are talking about the undergraduate university, and from an identifiable cluster of universities if we are talking about most law schools.

These pools of applicants represent a “supply chain” in which poor high school graduation rates and declining or static and aging populations lead to lower enrollment in an area’s universities. Lower enrollment in universities produces fewer graduates. This means reduced applications to graduate programs, including the many law schools that are dependent on recruiting applicants from limited territorial areas. If a university or law school is fortunate enough to be located in one of the country’s moderate to high growth regions based on population increase, economic or climate attractiveness, and higher percentages of the population graduating from high school and going to college then the applicant pool enjoyed by the universities and law schools are more abundant and the chances of catastrophic failure less.

This, of course, depends also on the number of institutions competing for applicants. An oversupply of universities and law schools, for example, such as is likely the case in the Washington, DC and New England areas may well endanger some of the law schools in those regions regardless of other factors. Florida and California, regardless of their attractiveness to many people, are most likely home to an excessive number of law schools, some of which are of questionable quality as measured against any criteria other than tuition revenues. Even with those states’ advantages we can expect closure of some of the law schools in California and Florida.

When the ‘Dominoes’ Begin to Fall

The fact that California is home to sixty law schools suggests an impending “domino-like” collapse of a number of those institutions, particularly given the fact that there are already problems with a shortage of “law jobs” in that state. A similar observation seems applicable to Florida. Ohio has nine law schools, Michigan five, Indiana another five and Pennsylvania eight. Not counting the “national” and “flagship” law schools in those states (Ohio State, Michigan, Indiana Bloomington, Penn State and the University of Pennsylvania) that leaves 22 law schools to compete for a limited pool of applicants in a region of static, aging or declining population with compromised economic systems, and high public expenditures on social priorities. It is difficult to see why Ohio needs nine law schools (not even counting competition with border-state law school graduates from schools such as Wayne State, Pittsburgh and Northern Kentucky.

It will be unsurprising if in five years several of the nine Ohio law schools have either merged or closed. It makes sense to me that Cleveland State, Case Western Reserve (even though private) and Akron ought to begin serious talks about how they can create a regional law school in much the same way that universities in the area collaborated in creating the Northeast Ohio Medical University arrangement. NEOMED is a state funded partnership of Cleveland State, Akron, Kent State University and Youngstown State University and has placement arrangements with seventeen hospitals in the area. Some law schools will survive or prosper only if they learn how to create new forms of structure and operation.

It is not surprising that the for-profit law schools and other newly created law schools that have emerged of late are located in high population growth areas with more sublime winter climates than are found in the Midwest. There is a pattern mirroring demographic, economic and population trends, not to mention the issue of migration to areas of warmer weather. Consider where the new law schools opened since 2005 are located–Florida Coastal, Charlotte, Charleston, Irvine, Liberty (Virginia), Lincoln Memorial (Tennessee), Ave Maria (abandoned Michigan for Florida), UC Irvine, Cooley (opening up in Florida), Savannah (Georgia), Florida A&M, Belmont (Tennessee). Those states benefit from their climates, economies and population growth. Even there, however, the new schools most likely jumped on “the bandwagon” a bit too late and now find that they are under a significant downturn they never anticipated when they created their program.

All of the above leads to the fact that non-national law schools located in areas where the pool from which they attract students (and place their graduates) must shrink, or merge with another law school in the same competitive territory, or be closed at the hands of universities increasingly unwilling to subsidize what they had always considered a positive revenue generator. A number of law schools are likely to be shocked when their universities simply “pull the plug” on their operations. As suggested above, eliminating an entire department is the most viable option both for budgetary reasons and to avoid protracted and costly disputes with law faculties. Cutting out an entire department can eliminate tenure rights and other employment conditions because the unit in which they had tenure and rights no longer exists and faculty in other academic departments possess priority rights and qualifications within those disciplines.

A consideration that makes the law school closure strategy more likely is that given the increased diversity found in law faculties any attempted discharge of a faculty member is almost certainly going to involve a university having to defend against a claim of discrimination whether it is said to involve age, gender, race or ethnicity, religion, political beliefs or a “conspiracy” by the administration to get rid of a trouble-making employee. It is my experience that all law professors have a firm belief in their own competence relative to other faculty members. Law faculty egos may be hypersensitive but they are not under-developed. If a law school and its parent university seeks to use termination of even a limited number of faculty in order to balance expenses and revenues it will face years of accusation and extremely expensive litigation. At some point and in some situations universities will decide it simply isn’t worth going through the turmoil and “pull the plug”. Attrition through retirement and death is one option but failure to replace faculty who leave slots also has serious morale, intellectual vibrancy, teaching coverage and financial consequences. The positive options for preserving the traditional business model and operational scale for numerous law schools are few and far between.

PS. “Nuff’ said about the “bad”. Sorry about the length. My blog posts from this point are going to be briefer and deal with three main themes. The most important will be possible solutions rather than “doom and gloom” scenarios. In addition, they will develop thoughts on where the law graduate job markets are headed and discuss various ideas and approaches on teaching strategy and other skills.

One comment

  1. Barry says:

    “The sometimes-maligned law school critic Paul Campos reports that 80 to 85 percent of American Bar Association accredited law schools are currently losing money [Campos, “80% to 85% of ABA law schools are currently losing money”, November 12, 2013]. The fact that Campos is resented does not mean that he is wrong.

    I’ll put him up against the Pollyannas any day. And I notice that you are using rather bad adjectives, rather than things like ‘frequently disproved’.

    “Attrition through retirement and death is one option but failure to replace faculty who leave slots also has serious morale, intellectual vibrancy, teaching coverage and financial consequences. ”

    This is also very, very slow. If a university needed to deal with the situation in a few years, and needs radical changes, attrition will take too long, especially as professors can’t be forced into retirement, and physically could keep working a very long time. Throw in the Great Financial Crash and the losses in house prices and investments these professors recently suffered, and it will take even longer.

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