Fred R. Conrad/The New York Times

The law school at Seton Hall University has put its untenured faculty on legal notice that their contracts may not be renewed for the 2014-15 academic year. The firings of these seven individuals are not certain, depending on the outcome of other steps the administration will try to bring the budget in balance.

The situation at Seton Hall is representative of many other non-elite law schools. Firing untenured faculty is a shortsighted approach to managing an academic budget. It encroaches on an important principle of academic freedom, namely that a tenure decision should be based on the merit of the case, not the budget of the department.

As a tax scholar who writes about issues that can hit rich people in the pocketbook, I am sometimes reminded why the institution of tenure, for all its flaws, is worth keeping around.

A few years ago, as an untenured faculty member, I wrote a paper that helped lead to a legislative initiative to change the tax treatment of carried interest. (Carried interest is the share of profits that investment fund managers receive in exchange for managing a fund. I argued that because carried interest is mostly a return on labor effort, not investment capital, the fund manager’s income should be characterized as ordinary income, not long-term capital gain.)

The proposal to tax carried interest became a polarizing political issue. Some fund managers took it in stride, acknowledging that they have enjoyed a windfall for a long time. Many others disagreed with me but respected my research, or at least my right to call it as I see it.

Others got personal. A local strip mall developer e-mailed my dean, requesting a meeting to discuss my “integrity” over the issue of taxing carried interest. In another instance, an aggressive (and tipsy) venture capitalist confronted me in a restaurant. He accused me of academic fraud and used some loud and colorful profanity to make his point. (After he left, a professor leaned over from the next table and asked incredulously, “That guy was that mad at you … about a paper?”)

My antagonists are often important donors to the universities that pay my salary. As a result, some friends and journalists have praised my courage in writing about controversial topics.

But the point is that, as a tenured professor, I don’t have to be courageous. And even before I had tenure, the university’s ideals of academic freedom reassured me that no dean would fire me because of my views.

Seton Hall’s decision to allow budget considerations to affect tenure outcomes sets a bad precedent. Law professors, economists and other academics are often called to testify in front of Congress, and academic research is often used to shape legal policy. Academic views are respected precisely because they are free from economic pressures; academics are not beholden to clients. If universities tie tenure decisions to department budgets, deans will be tempted to think about pleasing alumni in determining whom to tenure and whom to let go.

Across the country, law school enrollment has declined as prospective students respond to dismal employment prospects. Seton Hall has slashed its tuition by more than half for well-qualified students, to about $22,000 from $47,000, matching the in-state tuition rate at Rutgers. While reducing class size and lowering tuition is the right response to weak employment prospects, it obviously leaves a hole in the budget.

Neither law schools in particular nor universities in general are well designed to deal with fluctuating revenue. Academic budgets have high fixed costs, largely attributable to the salaries of tenured professors. Budgets have exploded with increases in administrative staff, information technology staff, and health care and pension costs.

During the fat years for legal education — a long run from the 1980s until 2008 — law schools raised tuition, raised salaries and expanded faculty and staff in a race to improve or maintain rankings in U.S. News and World Report.

Adjustments are needed, and Seton Hall’s decision to focus on untenured faculty might appear to make sense. But the decision is out of step with academic principles, and I believe Seton Hall should rethink its approach.

Hiring faculty is a unique process intended to separate outside influence and budgetary considerations from the assessment of merit. Deans should and do look at the budget to determine whether to create a new faculty “line” in the first place. Once they make that decision, however, professors, not administrators, decide who gets hired and who eventually gets tenure. The decision is based on peer-reviewed academic merit, not the preferences of deans or budget officers (or venture capitalists or real estate developers).

As a legal matter, budget concerns can be relevant to staffing decisions in extreme circumstances. Even tenured faculty can be fired without cause in the event of a severe financial circumstance known as financial exigency. A declaration of financial exigency requires more than the usual tight budget; it requires an imminent financial crisis that threatens the institution as a whole.

In a seminal 1974 case in New Jersey, for example, when Bloomfield College was facing severe liquidity problems, the court required it to consider selling off a golf course before firing faculty. Seton Hall’s law school may be in a tough spot, but there is no reason to think that its problems threaten the survival of the university as a whole. The university may need to subsidize the law school until, over time, the full-time faculty of about 75 professors shrinks by attrition.

It appears that Seton Hall has more wriggle room, legally, to fire its junior faculty than most law schools would. In an unusual arrangement, the junior faculty at Seton Hall sign contracts with the law school and are not protected by the general rules and regulations in the “faculty handbook” of the university. The contract allows the law school to terminate junior faculty, with sufficient notice, in its “sole discretion.”

There are better ways to shrink a law school budget. The size of the tenure-track faculty can shrink by retirement and attrition, not involuntary termination. Post-tenure review (by faculty, not administrators) can ensure that faculty members remain productive. Libraries can be moved online. Clinics can be closed, and adjunct faculty can be better utilized to team-teach practical courses alongside research faculty. The size of the administrative staff can be pared down, especially those who manage programs that might be considered luxuries.

According to its Web site, Seton Hall Law School has five centers, seven clinics and five study abroad programs. I doubt all of these programs are profit centers. Perhaps in the age of austerity, the law school will offer fewer opportunities to travel to Zanzibar, take a safari, or study lakeside in Geneva. Better to kill off a few boondoggles than to fire the junior faculty.