IOWA CITY, Iowa — Last month, facing a budget shortfall of at least $75 million because of the pandemic, the University of Iowa welcomed thousands of students back to its campus — and into the surrounding community.

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Iowa City braced, cautious optimism mixing with rising panic. The university had taken precautions, and only about a quarter of classes would be delivered in person. But each fresh face in town could also carry the virus, and more than 26,000 area residents were university…

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