In the old days, public law schools were principally funded through the state budget. Over time, many schools have begun to rely more heavily on tuition and fundraising. A couple of state universities have recently acquired private law schools with the understanding that they'd be self-sufficient. But few historically-public law schools have entirely abandoned the state dole. And those that have - think Virginia and perhaps Michigan - are fundraising titans.
Now, however, the folks at Arizona State are suggesting that ASU may drop state funding, relying entirely on tuition, research grants, and private fundraising. Why is this big news? Most obviously, because if ASU can pull off this transition, we may see a flock of other public law schools following suit. There are twin pressures operating here. First, strong state schools like ASU want to compete with affluent private schools - and can only do so if they spend aggressively on salaries and load reductions. But high salaries and light loads don't play well in state capitals - both because they look like "poor value" for taxpayer and because they make law schools look spoiled in comparison to virtually all other higher education programs in a state. (Just look at the law professor salaries at UVa to get a sense of this disparity.)
Second, there is far less public pressure to hold down professional school tuitions at state schools - since the production of new lawyers is not seen as a particularly critical public good. Just look at ASU: in-state tuition for law students is $21K while for undergrads it's $8K. If ASU Law goes off the state budget, tuition will rise - perhaps by 50% - but this is still far less dramatic than a move from $8K to $30K.
Of course, not every public school can make this move. ASU has several things in its favor. It is one of the two dominant law schools in the state - and therefore may have an affluent alumni base. It has little competition in the local market - Phoenix School of Law is its only competitor - and thus has substantial room to hike fees without hurting admissions. And since it's already underfunded, and charges an enhanced tuition, the price spike won't be as dramatic.
We know that the UC schools are moving to market tuition. I suspect that, over the next decade, we'll see a growing movement to privatize public law schools. There are a bunch of other state schools - think Wisconsin, Georgia, UNC, and Temple - that seem like candidates for a switch (politics permitting.) This shift could have fairly serious consequences - particularly for diversity and the percentage of students pursuing public service - though financial aid and LRAP might address this somewhat.
But as these mid-price law schools disappear, watch out for a new market segment: the discount private institution. If InfiLaw can figure out how to deliver an ABA accredited JD for $60K total - ideally, at night - they're going to see a line at the front door. No matter what US News or the rest of us think of them.
Update. ASU Dean Paul Berman offers these comments on the particulars of his institution's transition:
[ASU's] proposed tuition for next year increases by only $1500, and I foresee no increases substantially larger than that over the next five years as we move to self-sufficiency. I note that under this scheme we are likely to still be below $30,000 for in-state students five years from now, which will make our tuition lower than most of our peer institutions are now, let alone where they are likely to be five years from now. So, we intend to remain an affordable law school.... Even these relatively small tuition increases are being counter-balanced by large increases in financial aid....We are also aiming to increase our Loan Repayment Assistance Program, and we have instituted a Post-Graduate Public Interest Fellowship Program, which offers stipends to students to help them enter careers in not-for-profit or government service.