Law schools are experimenting with ways to diversify revenue in response to declining state support and tuition shortfalls, including those caused by smaller entering classes. This report reviews the range of things that schools have done. A common strategy has been to supplement the juris doctorate degree with other programs. This one does a good job of surveying these programs.
I’d be interested in hearing – on- or off-line – about any successes or failures of schools in generating new income streams. The corporatization of the academy makes me queasy, but law schools do need to find new funding models.
Cf – for two good argument about the potential harms of markets:
(i) Check out Michael Sandel’s What Money Can’t Buy. It makes the point that some goods are actually changed by being distributed though a market, i.e., if you can buy a Nobel prize, is it the same good? If – as I did – you loved his Justice class, you’ll enjoy the book.
(ii) See Posner’s critical comments on the marketization of the legal profession. He addresses the practice of law rather than legal education, but the same concerns apply. In effect, he is making Sandel’s argument. Coming from Posner, I found the idea that too much market freedom can lead to untoward (and unprofessional) behavior on the part of lawyers ironic, indeed, almost poignant.
Posted by Jose Gabilondo on March 20, 2016 at 02:31 PM
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On foreign students in colleges and the attendant costs (and benefits) to the university that hosts them: http://www.nytimes.com/2016/03/22/us/a-middle-eastern-tension-point-pocatello-idaho.html?_r=0
Posted by: Matthew Bruckner | Mar 22, 2016 6:37:46 AM
Jose, regarding your point about the potential harms of markets, you might find this Sunday NY Times article interesting: http://www.nytimes.com/2016/03/20/opinion/sunday/the-hidden-price-of-mindfulness-inc.html?smid=tw-nytimes&smtyp=cur
Here’s a quote: “If mindfulness can be bought as easily as a pair of Lululemon yoga pants, can it truly be a transformative practice that eases the troubled mind? It’s a question as slippery as a Zen koan.”
Posted by: Matthew Bruckner | Mar 21, 2016 8:55:33 AM
Do a lot of new LLM programs start with 20 students and come at $0 in cost? I doubt it.
From my view as at three different schools in the last five years, setting up an LLM program took a substantial amount of effort and expense (recruiting trips to China, for example) and none of the programs started with more than a handful of students. Presumably, recruiting will only grow more difficult as more law schools look to grow their programs.
If we assume start-up costs, a 40% university tax, and an initial LLM class of 5 students, these programs look a lot less appealing.
Posted by: Matthew Bruckner | Mar 21, 2016 8:28:09 AM
Jason,
I haven’t read the report, though many of your criticisms make sense to me. As someone who generally views revenue-driven creation of LLM programs (is there any other kind?) with despair, I’m nevertheless not sure you capture their attractiveness for law schools.
Just in financial terms, LLMs are not going to be transformative for law schools, as we agree. But they have the potential to bridge the gap between the expensive and difficult-to-repurpose teaching capacity with which schools are currently saddled, and the current and foreseeable numbers of students who can efficiently utilize it. Adding 20 LLMs, who will pay full freight (rather than 50-60% as schools compete for lately cost-sensitive 1Ls), and who do not implicate LSAT selectivity concerns is going to prove a difficult proposition for cash-strapped schools to resist. Even if discounting falls to 25% as the market stabilizes, that’s still equivalent to a ~27-student swing in 1L revenues. For all but the largest schools, that’s a big chunk.
In my experience, you’re right about the complicated internal accounting that governs law school finances. However (to use your example), $600,000 is not inconsequential, and is in all cases better than $0. Given that schools envision -not always correctly – that LLM revenues are “free” (i.e., unattended by new operating costs), it is not surprising that many schools are exploring this expansion.
Adam
Posted by: Adam Scales | Mar 21, 2016 7:52:40 AM
That report by the consultancy is really shabby. The authors seem to have just browsed websites, and not talked with anyone at the institutions cited. Moreover they make no attempt to discuss, even speculatively, how much revenue, if any, the various programs discussed actually generate or are capable of generating. The discussion of my institution, UW-Madison, is laughable. The report makes it seem as if UW has some sort of revenue-raising strategy centered around selling advertising of commercial products (I think that’s what the report is getting at) on campus property. I’ve been here almost a decade, and have seen no evidence, whatsoever, that anyone on campus is selling advertising space on campus to raise money! The idea is really funny to anyone who knows the place. I also think that many law schools, especially public ones, will have a lot of trouble thinking and acting creatively about new revenue streams because of how their budgeting/resource allocation is handled by central campus. For example, at UW, historically any “extra” income a campus unit generated would just find its way into the state (or University) coffers; units didn’t get to “keep” the new money. The obvious effect is to disincentivize entrepreneurial activity. Even where a law school does get to keep “new” money, it may have to pay a hefty “tax” to central campus; I understand that 20% would be very much on the low end; maybe 40% would be more typical. Once you take account of a University “tax”, the economics of the most obvious money-raisers (e.g. LLM programs) looks a lot less promising. It takes *a lot* of LLM students to generate a meaningful amount of $$ when you face a large University tax. Say you start a new program that anticipates 20 LLM students, each paying $50,000. That’s only $1,000,000/year, a small fraction of a typical law school budget. Now imagine central campus takes 40%; you only have an extra 600,000/year. That’s an even smaller fraction of your total budget. At best it will pay for 2 or 3 faculty (salary + fringe/benefits). I can’t imagine the math for CLE programs is any better. It is surely much worse. Only Harvard (and maybe some other top dogs) can do credible, expensive, short-term executive-training-type deals. And Harvard hardly needs more money! In my view most law schools have *very* few meaningful opportunities to raise meaningful revenue outside of the traditional sources — alumni giving and tuition.
Posted by: Jason Yackee | Mar 20, 2016 5:38:42 PM
Interesting. Those are 2013 reports, though. Lots may have changed over the intervening three years.
Posted by: Anon E. Muss | Mar 20, 2016 5:19:57 PM