Facing Annual Loss, UNH Law Says Deficit is Part of Smart Strategy

Oct 28, 2019

Credit Courtesy photo

The University of New Hampshire’s Franklin Pierce School of Law - the state’s only law school - has been running annual deficits of millions of dollars since at least 2014, according to budget reports obtained by NHPR. 

(Scroll down to view the report obtained via a Right To Know request.)

University officials say the losses are the result of a calculated strategy to raise the law school’s profile during a tumultuous time for legal education across the nation. At the same time, the school’s balance sheets show that it carries, by far, the largest operating deficits of UNH’s major schools in recent years.

“We see this as an investment, and we do anticipate that we’re going to see a return on that investment,” said Wayne Jones, provost for the University of New Hampshire.

Jones said he expects UNH Law to achieve a positive operating margin within the next three years. But over the past three years, UNH Law has spent twice as much as it has brought in through student tuition and other revenue, and it is projected to do the same in the current fiscal year. In the 2018-19 year, for example, the law school’s total operating budget was $5.5 million while it spent $11.9 million. That adds up to a loss of $6.4 million in that year. A year earlier, the school’s revenues fell $6.7 million short of expenses, an operating margin of negative 130 percent.

By comparison, the target margin for each UNH college is 2.5 percent. The overall UNH budget - which encompasses all colleges, including the law school - is financially in the black.

Financial records show that other colleges within the university, like the College of Liberal Arts (COLA), have experienced millions in losses, too. In the 2017-18 year, COLA laid off 17 lecturers, citing budget challenges. According to official UNH budget reports, COLA lost about $3.3 million that year, compared to total revenues of $79 million.

School officials say UNH Law’s deficits of recent years are the result of an overall investment strategy in the school, a response to big changes in the national market for legal education since the Great Recession. After an enrollment peak in 2010, law schools across the country hit a steep cliff. Enrollment dropped sharply, from 147,525 JD candidates nationally in 2010 to 110,183 in 2017. Experts pointed to a shrinking job market, with law firms hiring fewer and fewer associates, and a rise in outsourcing and automating legal work. High and rising tuition costs were another factor.

In an interview, UNH Law Dean Megan Carpenter, who joined the school in 2017, said while some law schools chose to lower admission standards to maintain enrollment levels and tuition revenue, UNH Law took a different path. She said the school purposefully chose to shrink the size of its student body by admitting just those students it was certain would succeed.

“It was a very strategic calculation to actually invest in the law school, to shrink those [enrollment] numbers, to effectively create the debt, and what happened is that strategy has been successful,” Carpenter said. 

Carpenter pointed to UNH Law’s spot within the top 100 of U.S. News and World Reports’ annual rankings of law schools (a position the school has held since 2014) as evidence of that strategy’s success. Carpenter also noted the addition of a new “hybrid” JD program, which includes online and in-person courses, as bringing new attention to UNH Law and distinguishing its academic offerings. She also cited graduates’ success in finding work: 95 percent of the class of 2018 had found work within 10 months of graduation, according to data from the American Bar Association

UNH Law’s enrollment has also begun to rebound from the smaller classes in the wake of the recession, from 71 first-year students in 2016, to 145 in the current incoming class.

“We’ve created what is truly an excellent law school,” Carpenter said.

This year, law schools across the country have also seen an uptick in enrollment for the first time in nearly a decade. Some studies cite the 2016 election of President Donald Trump as the cause for more applicants.

Multiple university officials said UNH only had financial and enrollment records for the law school dating back to fiscal year 2014, the year then-private Franklin Pierce Law Center fully integrated with UNH. John Hutson, who was dean of Franklin Pierce Law Center until 2011, says each year he was there, the entering class enrollment was in the mid-100s.

“We were having to reject more applicants…there was a gravy train that we were riding, and they could all pay the tuition.” Hutson said. 

But with the approaching changes in the legal field, he saw that things were going to change. Perhaps the biggest of those changes: Franklin Pierce decided to affiliate with UNH in 2010.

Though UNH Law’s enrollment has gone up recently, the school is still projected to lose another $5.9 million this year.

Paul Campos of the University of Colorado researches the finances of universities and law schools. He estimates that a majority of law schools are still operating in the red, but called UNH Law an “extreme situation.”

According to the budget statements, financial aid has accounted for a growing share of tuition at the school, with more than 60 percent of tuition being discounted in the last two years.

“This is a problem a lot of law schools have. They have to discount their tuition in order to break even on their operating revenues, and UNH seems to be a pretty radical example of that,” Campos said. 

Campos also pointed out that the law school environment in the northeast is relatively saturated, with several of the nation’s top law schools just south of New Hampshire’s border in Massachusetts. But UNH officials say changes at UNH Law have positioned the school to perform well compared to its peers.

“I think we’ve now turned the curve and we’re on the way back up,” said Jones, the UNH provost.

Editors Note: This story has been updated and edited to include more detail from UNH Provost Wayne Jones and UNH Law School Dean Megan Carpenter about the university’s strategy for improving the law school.

View budget documents obtained by NHPR: