Long-struggling Iowa Wesleyan to close due to budget shortfall; USDA to take over campus

One of Iowa's oldest universities, older than the state itself, will close its doors later this year after years of budgetary struggles.

The move to close Iowa Wesleyan University in Mount Pleasant by May 31 was announced Tuesday following a unanimous vote by the university's board of trustees.

"The decision is based on a combination of financial challenges ― increased operating costs due to inflationary pressures, changing enrollment trends, a significant drop in philanthropic giving, and the rejection of a proposal for federal COVID funding by (Gov. Kim) Reynolds," the university said in a news release.

The closure comes as the university says it has seen an increase in "post-pandemic" enrollment.

“It is with deep sadness that we announce the Board of Trustees has made the heartbreaking decision to close our beloved Iowa Wesleyan after 181 years as an educational pillar in this community,” said college President Christine Plunkett. “Our focus is now on assuring our over 850 students have a smooth transition to another educational opportunity.”

The university's physical campus will become the responsibility of the U.S. Department of Agriculture after it closes.

More:Former Iowa college basketball player jailed in China has been released: 'I couldn't believe it'

University fails in bid for state assistance

Reynolds in a statement acknowledged receiving a request from the university in February for $12 million to cover ongoing operating costs, but "as I’ve said many times, we endeavor not to spend one-time federal dollars on ongoing expenses."

An independent review of the school's finances showed Wesleyan had $26.1 million in loans from the U.S. Department of Agriculture, she said. Officials used the campus as collateral, and the loans could be recalled in full as early as November 2023, she said.

It was determined providing the COVID relief funds would not "solve the systemic financial issues plaguing the university," Reynolds said.

Reynolds’ office shared a copy of the "Rapid Risk Assessment: Funding Feasibility Analysis" with the Des Moines Register.

The report shows 50% of the university’s revenue came from tuition and fees, and only 9% from private gifts, grants and contracts during the 2021 fiscal year. Since 2015, Wesleyan has also seen an increase in the use of its tuition discount rate.

Many institutes of higher education rely on donations to help cover expenses.

The report noted the increase in enrollment over the last three years and the university’s simultaneous financial decline.

“This may be in-part due to the growing Tuition Discount Rate trend in subsidizing tuition with institutional scholarships, as well as significantly increased costs in student services, which have been outpacing instructional expenses over the past 3 years,” the analysis staid.

Iowa Wesleyan board Chair Bob Miller said the agriculture department is the primary lender to the university, and expressed his dismay that the state won't be providing aid.

“As a higher education institution that serves rural Iowa, we are disappointed in the lack of state support for this effort. All our indicators have been trending in a positive direction, but we needed funding to buy some additional time,” Miller said. “We are just heartbroken.”

Iowa Wesleyan has lost millions of dollars every fiscal year since at least 2013, according to tax records obtained by ProPublica.

Miller said the university’s enrollment increased after the COVID-19 pandemic but not by enough to achieve financial stability. “We’ve worked tirelessly to find a solution on all levels,” he said. 

Closure previously loomed in 2018

Plunkett said there have been previous financial cuts and spending freezes. She credited faculty and staff with making do for a long time with limited resources. 

In 2018, Wesleyan announced the school needed to raise $4.6 million to stay open through December 2019. It managed to achieve its goal using a combination of community donations and leveraging real estate.

It also formed what Plunkett said was a successful partnership with Southeastern Community College, which has a Mount Pleasant facility. She said the university in addition has formed regionally focused economic and workforce development programs in professions including nursing, teaching and law enforcement. 

But she said the administration and the board knew this year would be tough, given the impact of inflation, a drop in philanthropic giving and slower enrollment growth.  

Rachel Burns, a senior policy analyst for the State Higher Education Executive Officers Association, told Inside Higher Ed in January that this year and next could be a troubled time for marginal higher education institutions as federal pandemic aid ends.

“We think that there is going to be a catch-up of closures in 2023, and probably into 2024,” the publication quoted Burns as saying.

How will Iowa Wesleyan shut down?

Plunklett said she did not know exactly what the closure process will look like but that the agriculture department will oversee it. It also will oversee the final disposition of the school's endowed funds, though she added that the university is working with legal counsel to try to make sure each fund is aligned as closely as possible with its donor's intent. 

U.S. Agriculture Secretary Tom Vilsack's office declined to comment. Vilsack served as Mount Pleasant mayor before being elected Iowa governor, and his wife, Christie, is a Wesleyan trustee.

His office, in an email, said that "in accordance with federal ethics requirements, because his spouse currently serves on the Board of Directors of the University, Secretary Vilsack has recused himself from personal involvement in matters relating to Iowa Wesleyan University. Accordingly, those matters involving the University which may involve the Department of Agriculture have been delegated instead to the USDA Rural Development Mission Area and to USDA’s Deputy Secretary’s office, without the involvement of Secretary Vilsack."

Founded by Methodist settlers in Mount Pleasant, the university predates Iowa statehood, receiving its charter from the territorial legislature in 1842. Notable graduates include Belle Babb Mansfield, the first woman admitted to the bar as a lawyer in the United States; James Van Allen, who discovered the Earth's radiation belts, now named for him; and Peggy Whitson, the first female commander of the International Space Station.

More:Several hurt as Iowa Wesleyan University bus crashes east of Des Moines

What will the university’s closure mean for students, faculty and staff? 

Plunkett said the spring semester will end as normal. Students will complete their classes, there will be a graduation ceremony, and spring athletic programs will continue.  

“Nothing is more important right now than giving our students the kind of recognition and celebration of their accomplishments they deserve,” Plunkett said. 

But there will be signs that an end to campus traditions is coming.  

There will be a teach-out and transfer fair on April 10 for students, followed on the same day by a career and job fair for university employees and graduating seniors, Plunkett said. 

The school's news release said it has secured "teach-out agreements" with four other private colleges in the region: William Penn University in Oskaloosa, Upper Iowa University in Fayette, the University of Dubuque and Culver-Stockton College in Canton, Missouri, so students can complete their degrees,

Students — including online and graduate students — who opt to attend one of the colleges are guaranteed admission at their current cost and financial aid levels, Plunkett said. 

Plunkett said about 30% of Iowa Wesleyan’s students are from Iowa, 54% are from out-of-state and the rest are international students. She also said 65% of students receive need-based Pell grants, and many are the first in their families to attend college and come from diverse backgrounds. 

Meg Richtman, spokesperson for the university, said outreach began Tuesday to inform the about 100 students enrolled for next year about the closure and help them find new opportunities. 

Plunkett said the university has about 110 full-time employees, including 35 faculty and 75 staff. She said faculty and staff’s retirement funds would remain in an account with the education-oriented TIAA investment firm unless employees decided to transfer them. 

What will the closure mean for the community?

The state plans to help support the Mount Pleasant community, Reynolds said.

"I have directed the Iowa Economic Development Authority and Iowa Workforce Development to reach out to community and business leaders, and work together to keep the local economy strong," she said.

Staff writer Donnelle Eller contributed to this article.

Samantha Hernandez covers education for the Register. Reach her at (515) 851-0982 or svhernandez@gannett.com. Follow her on Twitter at @svhernandez or Facebook at facebook.com/svhernandezreporter.

Phillip Sitter covers education for the Ames Tribune, including Iowa State University and PreK-12 schools in Ames and elsewhere in Story County. Phillip can be reached via email at psitter@gannett.com. He is on Twitter @pslifeisabeauty.