80% Of Law Schools Operating At A Loss?

by Jeff Schmitt on

University of Richmond School of Law

Are 80% Of Law Schools Operating At A Loss?

Just when you thought it couldn’t get any worse…

Surprise!

This week, Paul Campos, a University of Colorado law professor and contrarian author of The Obesity Myth, continues to tweak the legal establishment with a jaw-dropping claim:

“…the large majority of law schools — I estimate between 80% and 85% — are incurring significant operating deficits in the present fiscal year.”

Say that again?

Those are Campos’ estimates, which may reflect just how financially-strapped law schools have become.

So where did Campos find this data?

According to his post on Lawyers, Guns & Money, Campos pulled “current operating budgets of a representative sample of the nation’s 202 ABA-accredited law schools.” He acquired this information “via various routes, including asking schools for them, open records requests, tax filings, and private communications with individuals.” Although law schools don’t necessarily use the same accounting standards – and sometimes incorporate university-wide operating expenses into their budgets – Campos believes he can paint an accurate financial picture through three numbers: Expenses, tuition, and gifts.

Based on his data, Campos estimates that law school revenues have dropped 15 percent from where they were three years ago. If you accept the conventional wisdom that law schools spend as much as they make, Campos believes more than three quarters of accredited law schools are running in the red.

So why not just cut overhead like most companies do in these situations? Well, that’s where you get into the stodgy culture of academia. First, Campos notes that many of these expenses are “homogenous and fixed, consisting largely of personnel compensation.” As a result, “…serious downsizing of labor costs can’t be undertaken without declaring a fiscal emergency — a move which has serious reputational costs.” Campos adds that trimming positions wouldn’t result in a proportional reduction in physical plant costs either. What’s more, expenditures like library subscriptions, adjunct faculty, and clerical personnel are relatively small compared to professional staff and plant costs.

In addition, Campos singles out law school rankings for being an enabler. Rather than getting their financials in order, law schools are continually adding staff and programs so they can climb a few notches in US News’ rankings.  To cover these rising costs, law schools simply jack up tuition. To borrow a cliché, law schools are too busy ‘keeping up with the Joneses’ for nominal gain. In Campos’ words, “…law schools spend more every year because they raise tuition every year, and they raise tuition every year because they can…This system is a sure-fire recipe for creating fiscally reckless institutions, that charge prices for their outputs that bear no relation to the actual economic value of those outputs.”

Above The Law perfectly sums up this conundrum: “Law schools continue spend their money on faculty they can’t afford, while students continue going into debt for a degree that doesn’t get them a good job.” So when will this death spiral end? Like anything else, it’ll happen when law schools reach the proverbial cliff. By then, it’s usually too late.

Sources: Lawyers, Guns and Money, Above The Law

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