(a) There is established in the State Treasury a special revenue fund known as the "research challenge fund." Moneys deposited in this fund shall be administered by the Higher Education Policy Commission.

The moneys deposited in this fund shall be used to fund coal research and development projects at institutions of higher education located in this state. Research includes, but is not limited to, carbon sequestration and carbon technology research and development projects. The moneys deposited in this fund shall also be used to fund other research and development projects at institutions of higher education in this state.

(b) The policy commission shall use the recommendations of the EPSCoR state advisory council in its allocation of appropriations made to the research challenge fund and in its development of procedures for competitive application and review of proposals for funding. The research challenge is a critical component in the state's strategic plan for economic development and the contribution of higher education in the economic health of the state and the EPSCoR state advisory council is well qualified, by virtue of its research-oriented mission and membership, to advise the policy commission in the allocation of research challenge funding.

The objectives of the research challenge are to:

(1) Increase the research capacity of institutions of higher education and the competitiveness of these institutions to apply for external funding;

(2) Stimulate the development of research and research products that are directly applicable in improving the economic competitiveness of existing West Virginia industries and the development of new business and jobs in the state;

(3) Leverage limited state resources with private and federal funds to support projects and activities directly related to economic development by requiring matching funds and cooperative agreements with external partners;

(4) Increase the production of undergraduate and graduate students of programs in the sciences, technology, engineering and mathematics, with special attention to emerging disciplines such as biometrics; and

(5) Hold institutions more accountable for the success of research projects funded under this program with the expectation that state support will be phased out and the project or activity will be terminated if it is unable to generate ongoing external support.

(c) The priorities for the research challenge shall be:

(1) Research on energy generation, distribution and utilization that builds on the state's existing energy research strengths, related research products and technology transfer programs;

(2) Research, education and outreach conducted by the EPSCoR program. This federal program is recognized by the national science foundation as the state's primary entity for developing the research capacity that is so important to the state's economic and educational development;

(3) Research projects that are related to the economic development of the state and that have significant potential to attract participation and funding from industrial, federal or foundation partners;

(4) Collaborative projects between higher education and public education to improve science and mathematics education;

(5) Graduate education in science (including medical education), technology, engineering and mathematics. The allocation shall be used for the increase in doctoral students and programs at West Virginia University and Marshall university in these fields; and

(6) Recruitment of eminent scholars to strengthen research capacity and competitiveness for external funding.

(d) The policy commission shall report to the Legislative Oversight committee on educational accountability annually on the results of the projects and activities funded by the research challenge appropriation.

(e) The priorities established in subsection (c) of this section shall be reviewed biannually by the policy commission and the EPSCoR state advisory council beginning in two thousand six. The policy commission shall include any recommended adjustments in its budget request for the two thousand seven budget.