Notable Change in the ABA Questionnaire

July 8th, 2013 / By Deborah J. Merritt

Last week the ABA notified law school deans that it will no longer request annual information about each school’s expenditures. Schools will report three years of expenditures in connection with site visits, but the annual reporting of expenditures has been eliminated (see p. 4).

H/t to TaxProf and Brian Leiter for this breaking news. Now, what does the change mean for ABA data collection, legal education, and the US News rankings?

Background: The Annual Questionnaire

The ABA collects data from law schools every year through its annual questionnaire. That instrument, revised annually by the Council’s Data Policy & Collection Committee, gathers information about enrollment, courses, faculty composition, and other issues related to legal education. At least within recent years, the questionnaire has asked schools about both revenues and expenditures. The 2013 questionnaire will ask only about overall revenues, not overall expenditures.

The revised instrument still asks about two specific expenditures: money spent on library operations and money spent for student scholarships, grants, or loans. It does not, however, require schools to report other expenditures–such as money spent on salaries, conferences, coffee, and all of the other matters that make up a law school budget.

Going Forward: Data, the ABA, and Legal Education

I’m puzzled that the ABA has chosen to eliminate expenditures from the annual questionnaire, especially given the contemporary budget crunch at many law schools. Responding to the questionnaire tormented me when I was an associate dean, so I don’t advocate mindless data collection. The information collected by the ABA, however, seems to serve numerous valuable purposes. Questionnaire results help track the overall health of legal education, inform accreditation standards, and offer perspectives on policy issues related to law schools. The instructions to the fiscal portion of the questionnaire also suggest that the ABA uses this information to monitor the fiscal health of individual schools. Given the ABA’s role in protecting students, that is an important goal.

Given this range of objectives, why will the ABA continue to collect annual information about law school revenues, but not expenditures? Law schools seem to be facing unprecedented budgetary strain. In times like this, wouldn’t the ABA want to know both revenues and expenditures–so that it could gauge the financial course of legal education? As the Task Force on the Future of Legal Education finalizes its recommendations, wouldn’t it want to know how badly law schools are hurting? And as the Standards Review Committee considers the costs imposed by some accreditation measures, wouldn’t it be useful to know whether law schools are operating in the red?

I’m not suggesting that the ABA should distribute scorecards revealing the financial health of each law school. But wouldn’t aggregate data on revenue, expenditures, and the gap between the two be particularly useful right now? Annual reports of revenue give us some measure of our industry’s health, but expenditure figures are just as important. How else will we know whether schools are able to adapt to flat or declining revenues?

There’s also the matter of protecting students at individual schools. Each school will have to demonstrate its financial health during site visits, but those visits occur every seven years. Seven years is a long time–plenty long enough for a school to sustain significant financial damage and endanger the education of enrolled students. If the ABA is going to monitor anything, shouldn’t it check both revenues and expenditures on an annual basis?

I understand that many educators are celebrating elimination of the expenditures section, largely because of the US News effect discussed below. I assume, however, that the questionnaire once served purposes other than generating data for US News. Are we sure that we want to reduce our information about the financial health of legal education? Now?

Going Forward: US News

Against all reason, US News has long used expenditures as a significant component of its law school rankings. Expenditures currently account for 11.25% of the ranking formula. This component of the rankings has rightly provoked criticism from dozens, if not hundreds, of legal educators. The ABA’s elimination of expenditures from its annual questionnaire might be an attempt to discourage US News from incorporating this information.

If that’s the ABA’s motive, will the gambit work? It seems to me that US News has at least four options:

1. Continue to ask law schools to supply expenditure data. US News already asks for information that the ABA doesn’t request; it has no obligation to track the ABA’s questionnaire. Calculating expenditures takes time if you’re trying to game the system (or at least keep up with other schools that are gaming the system); the school has to think of every possible expenditure to include. Gamesmanship aside, however, it would be hard for a dean to claim with a straight face that a request for expenditures was too burdensome to meet. If a school isn’t tracking its annual expenditures, and doesn’t have a computer program that will spit those numbers out on demand, that’s really all we need to know about the school.

I hope US News doesn’t pursue this approach. I agree with all of the critics that expenditures serve no useful purpose in a ranking of law schools (even assuming that a ranking itself serves some useful purpose). It seems to me, however, that US News could easily maintain its ranking system without the ABA’s question on school expenditures.

2. Reconfigure the ranking formula to include just library and student aid expenditures. The ABA questionnaire, rather curiously, continues to ask for data on library and student aid expenditures. US News, therefore, could decide to plug just these expenditures into its ranking formula. The formula already does count student aid expenditures separately, so there’s precedent for that.

This approach would be even worse than the first option. Giving library expenditures extra weight would tempt law schools to increase spending in a part of the budget that many critics already think is too large. Creating incentives for additional student aid sounds beneficent, but it would fuel the already heated arms race to snare credentials with scholarship money. We need to wind that race down in legal education, not extend it further.

3. Replace expenditures with revenues. Since the ABA questionnaire still asks for each school’s annual revenue, US News could incorporate that figure into its ranking formula. This approach might be marginally more rational than the focus on expenditures: Schools with more money may be able to provide more opportunities to their students. Focusing on revenues, furthermore, would not penalize schools that saved some of their revenue for a rainy day.

On the other hand, this criterion would continue to bias the rankings in favor of wealthy, well established, and private schools. It would also invite the same type of gamesmanship that schools have demonstrated when reporting expenditures.

4. Eliminate money as a factor. This is my preferred outcome, and I assume that it is the one most educators would prefer. Expenditures don’t have a role in judging the quality of a law school, and they’re a source of endless manipulation. Both law schools and their consumers would be better off if we rid the rankings of the expenditures factor.

Conclusion

US News will do whatever it chooses to do. Years of entreaties, rants, and denunciation haven’t stopped it from incorporating expenditures into its law school ranking. I’m doubtful that the ABA’s change will suddenly bring US News to its senses. Meanwhile, I’m very worried about how we’re going to inform legal educators, regulators, and potential students about the financial health of law schools. Revenues are fun to count, but running a law school requires expenditures as well.