What makes a donation to a law school a "transformative" gift? One idea might be free tuition for all students

Professor Brian Leiter offers some important thoughts on “transformative” gifts to law schools. Many large gifts, often resulting in the renaming of the law school, come with a great deal of fanfare. And then comes the long, sometimes unanswered question—what happens with the money? And, the follow up—did it truly “transform” the institution?

First, my colleague Professor Rob Anderson notes that the money may not be “real.” Press releases boasting a dollar figure often do not disclose the structure of payment. That might include previous gifts to the law school “rolled into” the total new figure that may come with naming rights—money already used for other things. That might include money available only upon the donor’s death (or the donor’s and spouse’s death)—proceeds from an estate, property to be sold upon death, a life insurance policy, and so on. Such conditions can defer money for decades into the future. That might also include conditions on present money, such as money trickled out over a period of years, interest payments on a loan or investment, or so on.

In short, the dollar figure advertised is often not present liquid cash. Media often uncritically report this figure—usually, of course, because the precise details might be subject to a non-disclosure agreement. So one might never know the actual size of new, present money for “transforming” the institution.

Second, both Professor Anderson and Professor Jared Ellias get at a common use of money—essentially, using it for existing obligations. It could go toward the university’s operations, or to existing faculty lines, or to replace existing costs, or to nickle-and-dime certain projects, it could dramatically understate the impact of the gift. Consider, for instance, a contribution to be used for “student scholarships.” If the existing scholarship budget is, say, $5 million, and a $1 million gift (really, spinoff from a $20 million gift) goes toward scholarships, the question is whether the budget remains at $5 million with the $1 million simply replacing funds used elsewhere (perhaps to the university and not the law school!), or whether the funds are added to the scholarship budget to make it $6 million. Even then, suppose a $6 million scholarship budget. If the following year tuition prices are raised significantly, or the remaining scholarship budget doesn’t increase as would have been anticipated without the gift, the value of the gift drops.

This relates to a third point raised by Professor Ellias, which is that gifts (and, specifically, present cash!) have to be very large. $20 million gets you $1 million per year in endowment spinoff; $100 million gets you $5 million per year. So assuming that often the money isn’t present cash, and often it gets consumed in other endeavors, that leaves little for

But the fourth point gets to something raised by Professor Leiter’s original post. What would be transformative about a gift? Professor Leiter notes that many schools that have received substantial gifts appear to be little different than they were before the gift—good flagship state schools or perhaps better able to withstand financial downturns. One way to measure that, I suppose, might be to look at whether schools’ rankings or scholarly profiles improve. (Of course, one major factor in the USNWR rankings is expenditures per student, and sizeable gifts could shift that fairly dramatically.)

But setting aside the rankings profile, I think a good question is to think about how such money could be use to transform the institution. If we’re going to use that word, it should mean something. I think in some ways back to The Social Network. A million dollars isn’t cool—a billion dollars is. What could you say that would just silence a room?

I’m not that innovative. But the single most dramatic thing a school could attempt to do? Make it free.

When UC-Irvine announced that its first law school incoming class would have zero tuition for all students, it was probably the single most interesting and significant law school expenditure announcement I recall in… well, recent memory for sure, and perhaps in my lifetime. It didn’t mean that some students with low LSAT & UGPA predictors would pay full tuition while subsidizing scholarships for others. It meant that the graduates would have some debt from cost of living for three years, but likely quite manageable for many. Free tuition? Hard to beat that idea. UC-Irvine admitted a highly selective class of about 60 for that first year. Bit it couldn’t continue it beyond the first year.

I think about recent medical schools like NYU that recently announced offering free tuition. I think about the recent commencement speaker at Morehouse College who announced he would pay off every graduate’s student loans.

It’s true that most lawyers often go on lucrative careers. But it’s also true that student loans are tough, tuition keeps rising, young graduates’ career choices are often defined by repaying loans or debt forgiveness program compliance, not to mention the life choices that come from it.

It’s true that it would require a lot of present cash to create this option—or, at least, some cash followed by the announcement and vigorous fundraising off it. A non-trivial number of law schools have budgets of less than $25 million a year, and a $500 million gift could endow the entire annual budget. A $1 billion gift would endow a $50 million budget. Essentially, such types of massive infusions would truly transform legal education.

In the end, how the money is used defines the transformation. Thinking about what would transform a law school is the first step. Then finding the money to carry out that vision comes after. But I’m interested to know if others have ideas about how to determine whether a transformation has taken place, or other ways to transform a law school than the one I identified.

Disclaimer: I teach at Pepperdine University, at a law school which has just received one such sizeable gift!