September 09, 2011
ScamLaw: Ways to Cut Costs
Posted by Brett McDonnell

Although as I said in my previous post I am somewhat skeptical that employment rate figures play the critical role some argue, I think Professor Campos is dead on target to focus attention on the unsustainability of the current tuition model.  For instance, at my school in normal economic times, getting a job of some sort should happen for almost all of our students--I completely agree with Alan that the depression has worsened matters immensely, but presumably one day that shall pass.  (Very unhappily, that is little consolation for recent grads.  Even when better times return, many of them will find it hard to re-boot their careers.  Entering the labor market during hard times can have lifelong consequences.  That is awful, but it is not specific to the legal market.)  But when better times return, many graduates even at a quite good school like my own will find they are not getting that big firm job, and the job they do get will make their debt very hard to service.  This is a long-term problem (I suspect, although it involves reading the tea leaves for the future of the legal market), and one that law schools must face.

How can we cut costs to lower tuition?  Law school budgets aren't that complicated.  There are just a few big ticket categories.  Financial aid is one.  One can argue that it would make a lot of sense to simultaneously lower both aid and tuition, which would make costs more transparent and equal.  As with so many things, USNWR rankings play a bad role here--schools use part of their high tuitions to fund high aid targeted at students with above the schools' median LSAT and/or grades and hence raise those numbers, leading to aid that goes disproportionately to strong students, who on average come from more privileged backgrounds. 

Another big ticket item is administrative salaries.  This is quite a big chunk of the budget, and it has grown a lot in recent decades.  Indeed, for higher education generally, administrative costs are apparently the biggest source of budget inflation, according to this article.  I'd be interested in seeing similar figures for law schools.  Some of that inflation is bureaucratic bloat, suggesting room for cutting costs with low impact on quality.  That cost-cutting should happen, but I doubt we will see huge savings there--the internal dynamic of increased bureaucratization is a deep problem for all sorts of organizations, and I doubt law school leaders are organizationally savvy enough to go far in solving a problem that is so widespread.  Other parts of the growth in administration represent new value added.  IT staff are the most obvious example, but expanded student services staff may be another--I think students today expect more individualized attention than past generations.  Cuts in these areas are possible too, and will also probably have to happen, but they will result in reduced services.  Another area of growth is development staff, especially at public schools like mine which no longer get much from the state.  But if at all competent, those staff should more than earn their keep, so cuts there usually will make little sense.

That leaves faculty salaries.  We are indeed over-paid and under-worked, and eventually that will have to change if schools are to significantly cut tuition.  Many factors help explain the growth in salaries, and it is rather hard to predict if and how those factors might change.  Faculty are the leading constituency in law school governace, so there is clearly significant rent-seeking involved.  The long boom in BigLaw salaries played a huge role in at least two respects--it made students willing to pay more, and it increased the opportunity costs of teaching law (most faculty, after all, could be in a big law firm if they chose--it is no accident that the highest paid areas of academia, like law, medicine, and business school, are the areas where faculty have the best outside opportunities).  If BigLaw job and salary growth are indeed permanently slowed (as I suspect is the case), that will put pressure on law schools.  A final major factor is the USNWR rankings--they strongly reward high perceived faculty quality (which can be bought) as well as high total expenditures.  Any decently-ranked school which chose to unilaterally slash salaries and raise teaching loads would find that its ranking plummeted.  If it could credibly argue to employers and potential students that it still offers a good education only now at a much lower price, that would be OK, but schools don't seem to have found a way to do that and break from the USNWR game.

But if the legal market has indeed changed for the long run, we will eventually see salaries start to drop, because they must.  I would expect to see salaries drop first at lower tier schools, which have less to lose in the rankings.  The very top schools probably still feed enough of their grads into BigLaw that they will be able to maintain their current model, more or less.  Many schools in between, including my own, will feel a highly uncomfortable crush between these two ends.

Finally, how can schools increase teaching loads, probably cut or at least not increase faculty size, and yet still offer more of the kind of practical training that students and employers quite rightly demand?  Good practical training, after all, often requires more focused attention from faculty. That's a very hard question, and the schools that first answer it well should get a real benefit.  I think a big part of the answer has to be a continued growth in the use of adjunct faculty and externships.  Adjuncts are an order of magnitude (or two) cheaper than full time faculty, and they have more practical experience.  Most schools have already moved in that direction, but the market will force much more movement.  Some current ABA and AALS rules limit the ability of schools to do that.  For instance, ABA Standard 304 limits how many credits can be received in courses outside regularly scheduled class sessions, ABA Standard 305 strictly regulates field placement programs, and the AALS limits the fraction of total teaching time that can be offered by persons other than full time faculty.  Rules like these are pernicious and must be eliminated.

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