For the class entering law school in the fall of 2013, law school applicants have ebbed to a 30-year low. The collapse in demand for law school admission is producing profoundly serious business problems for a large proportion of U.S. law schools — problems that, for the moment, are hidden from public view as the resulting budgetary issues migrate from the dean’s suite to the office of university presidents.

In a nutshell, central universities are being asked — or will be asked, in ways that will not inspire confidence in the current law school leadership — to provide a financial backstop so their law schools can enroll fewer students or offer more sizeable scholarships to fill the requisite number of seats. Because of the magnitude of the financial stakes involved — million-dollar shortfalls just for the upcoming fiscal year with no clear end in sight — this is as difficult a decision as a university president will ever face.

Below is the letter I would write to a university president who sought my advice on what to do. But the intended audience is law professors and practicing lawyers who seek to help their alumni institutions. For many of these readers, the best way to protect your law school is to make the university president’s job easier by (1) coming to terms with the brutal facts, (2) honestly communicating your dilemma to the central administration and (3) proposing a solution that is realistic and potentially viable, even if the short- to medium-term tradeoffs are extraordinarily difficult and painful.

 

Dear President Smith,

Per your request, I have reviewed the financials of your law school. The law school administration projected an 8 percent decline in enrollment, which would be offset by not replacing faculty members and staff who will be retiring at the end of the academic year and some additional belt-tightening activities. Unfortunately, in the current highly unpredictable admissions environment, enrollment declined by 15 percent, thus producing a $1.5 million shortfall in the 2013-14 law school budget.

In light of these facts, you have asked me whether the 2012-13 admissions cycle is likely the true bottom of a cyclical trough. The answer to this question is no. Law school applicants are falling because the cost of a J.D. degree is going up at the same time that the traditional legal services industry has entered a period of gradual decline. For example, according to the U.S. Census Bureau, the number of jobs in the offices of lawyers hit a high-water mark in 2004 — nearly 10 years ago. Since that time, the number of paid employees has declined by 54 ,000, from 1,123,000 in 2004 to 1,069,000 in 2011. Trendlines from the National Association for Law Placement (NALP) are even more troubling. Since the late 1980s, the proportion of graduates finding entry-level law firm jobs has declined from approximately 65 percent to less than 50 percent for the classes of 2010 and 2011.

With the decline in jobs in private practice, the average starting salaries for all law school graduates has declined from $85,000 (for the class of 2009) to $74,000 (for the class of 2011). The median salary now hovers even lower, at $60,000 per year. To further compound problems, the largest entering class on record — those students entering law school in the fall of 2010 — are graduating this spring and entering a highly saturated legal market. Only 55.7 percent of their immediate predecessors found full-time, long-term jobs as practicing lawyers.

The current situation is political ly combustible. Despite average debt loads in excess of $100,000 per year, nine months after graduation approximately one-third of all law school graduates do not have full-time, long-term professional jobs — the minimum desired outcome of virtually every student who enters law school.

Arguably, law schools are the bleeding edge of the growing problems facing all four-year colleges and universities: ­growing tuition and debt loads in combination with flat or declining earning for graduates. The six-figure debt loads of unemployed or underemployed law students make them the poster children for a system of higher education that is rapidly on its way to becoming unsustainable. Sallie Mae, the government -chartered lender for higher education, is having difficulties selling its bundled student loans to large institutional investors, prompting concerns that the federal government is financing a student loan bubble that is destined to burst.

In summary, there is significant excess capacity in the legal education system. So the dilemma facing a large proportion of university presidents, such as yourself, is the need to choose one of two difficult paths. You can either tackle head-on the difficult restructuring issues facing your law school, or alternatively you can cut your losses today and close the law school rather than risk another devastating shortfall as your school edges toward open enrollment and disastrous future problems with bar passage.

One key factor to consider is the employment prospects of your current students. Since the American Bar Association began tracking more granular information, we learned that some regional law schools — such as Alabama, Kentucky, West Virginia and Louisiana State — enjoy relatively strong placement records (greater than 80 percent in full-time, long-term jobs that utilize the law degree) that are on par with the national law schools, albeit these legal jobs tend to be in Alabama, Kentucky, West Virginia and Louisiana, and few jobs pay six-figure salaries. In contrast, many law schools are feeding highly saturated regional markets. For example, for law schools located in California, the average rate of bar passage-required employment is 48.9 percent, with several schools below 30 percent. Law schools located in Michigan are in worse shape, placing only 42.3 percent of their graduates in bar passage-required jobs.

Because you are in one of several jurisdictions with numbers similar to California and Michigan, closure may be the best long-term course for the university. One step short of closure may be rolling the law school into the College of Arts and Sciences under a newly created law department that can service the undergraduate population. Faculty teaching loads and salaries can be rationalized accordingly. This would permit a dramatically pared down J.D. program that could one day be rehabilitated.

The one militating factor is your faculty’s willingness to restructure its curriculum and mindset. Law school graduates are not wanting for jobs because law is going away. Rather, the legal industry is suffering from a productivity imperative — both private citizens and wealthy corporations need better, faster, cheaper legal solutions. Delivery on this imperative requires a redesign of both the legal system and the migration away from customized legal services to standardized legal products.

The first hurdle in restructuring is the faculty itself embracing the need for change. The second hurdle is your own willingness to expand the scope of academic productivity. The most successful law schools in the future will be closely engaged with employers seeking to adapt to a rapidly changing industry. These same schools will also need to effectively collaborate with professionals from other disciplines, including systems engineering, information technology, finance, marketing and project management. Law faculties locked into the traditional positional competition over published legal scholarship are going to be unable to meet these heightened job demands. As the university president, you need to provide the law faculty with the latitude to adapt.

Frankly, saving your law school is going to require courage and leadership. Brace yourself for vilification. Even if you are successful, your efforts and intentions will not be appreciated for years to come. I do not envy your choices. I certainly wish you the best of luck — you will need it.

William D. Henderson is professor of law, Val Nolan Faculty Fellow and director of the Center on the Global Legal Profession at Indiana University Maurer School of Law – Bloomington.