Senate Bill No. 287

(By Senators Tomblin, Mr. President, and Caruth,

By Request of the Executive)

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[Introduced January 22, 2008; referred to the Committee on Education; and then to the Committee on Finance.]

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A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §18B-18A-1, §18B-18A-2, §18B-18A-3, §18B-18A-4, §18B-18A-5, §18B-18A-6, §18B-18A-7, §18B-18A-8, §18B-18A-9, §18B-18A-10, §18B-18A-11 and §18B-18A-12, all relating to the establishment of the West Virginia Research Trust Fund; providing legislative findings of fact; defining certain terms; creating a special account in the State Treasury; providing for allocation of moneys appropriated for deposit into the West Virginia Research Trust Fund; authorizing Marshall University and West Virginia University to establish directed research endowments; providing requirements for directed research endowments; providing for administration of directed research endowments by applicable governing board; granting investment authority to the governing boards; authorizing use of investment earnings accruing to directed research endowments and prohibiting the expenditure of the principal of a directed research endowment; establishing criteria and restrictions for qualified private donations and qualified private donation pledges; establishing eligible uses of directed research endowment proceeds; providing for submission of directed research endowment plans; establishing criteria and procedures for distribution of matching moneys from the West Virginia Research Trust Fund; providing for reallocation of moneys in the West Virginia Research Trust Fund; requiring participating institutions to return unmatched moneys to the fund under certain circumstances; authorizing distribution of certain moneys to state colleges; establishing powers and duties of the Higher Education Policy Commission; and requiring the Higher Education Policy Commission to submit an annual report.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated §18B-18A-1, §18B-18A-2, §18B-18A-3, §18B-18A-4, §18B-18A-5, §18B-18A-6, §18B-18A-7, §18B-18A-8, §18B-18A-9, §18B-18A-10, §18B-18A-11 and §18B-18A-12, all to read as follows:
ARTICLE 18A. DIRECTED RESEARCH ENDOWMENTS.
§18B-18A-1. Legislative findings and purpose.
(a) The Legislature hereby finds and declares as follows:

(1) That the continued expansion of the national economy will be dependent upon the ability of its institutions of higher education to increase the quantity, productivity, and quality of its citizens in scientific and technical fields of study. Indeed, the failure of the United States to compete in these areas could lead to lower standards of living, dependence upon foreign intellectual capital, and international insecurity;
(2) That the future of the economy of the State of West Virginia is equally dependent upon the ability of Marshall University and West Virginia University, the state's two doctoral- granting, public research universities, to promote and train scholars, researchers, and technicians in these diverse fields of study;
(3) That a recent emphasis on the creation of innovative curricula, plus the receipt of significant private donations by Marshall University and West Virginia University, has led to major expansions in certain areas of study including energy, national security technology, environmental sciences, health and biomedical sciences, biometrics, biotechnology and nanotechnology;
(4) That despite these expansions, the additional investment of both private donations and state moneys is critical to continue funding the recruitment of world-class scientists, researchers, research staff, technicians and professional degree graduates, as well as funding for laboratories and scientific equipment;
(5) That the establishment of a state fund to allocate matching public moneys to the state's two doctoral-granting public research universities will provide an incentive to private donors to make corresponding donations for certain priority areas of study consistent with each institution's long-range strategic plan for research.
(b) It is the intent of the Legislature to establish a fund administered by the Higher Education Policy Commission for the distribution of moneys to Marshall University and West Virginia University, thereby promoting strategic private donations for targeted areas of research and creating a sustainable source of funding for research initiatives that are critical to achieving long-term goals of research-based economic development and economic diversification, while increasing the potential for the patenting, licensing, and related technology transfer and commercialization of scientific and technological research in the state.
§18B-18A-2. Definitions.
(a) General. -- Terms used in this article have the meaning ascribed to them in section two, article one of this chapter, unless the context in which the term is used in the article clearly requires a different meaning or a specific definition is provided in subsection (b) of this section.
(b) Words and phrases defined. -- For purposes of this article, the term:
(1) "Directed research endowment" means a research endowment account established at and administered by a participating institution in accordance with the provisions of section four of this article.
(2) "Directed research endowment proceeds" mean those investment earnings accruing to a participating institution's directed research endowment and available for expenditure by a participating institution in accordance with the provisions of subsection (d), section four of this article.
(3) "Fund" means the special account designated as the West Virginia Research Trust Fund established in section three of this article.
(4) "Participating institution" means Marshall University or West Virginia University;
(5) "Qualified private donation" means any private donation, gift, or bequest to a directed research endowment established at and administered by a participating institution that meets the criteria set forth in section five of this article; and
(6) "Qualified private donation pledge" means any pledge, commitment, or other agreement to donate a qualified private donation to a directed research endowment that is made pursuant to a written agreement between the donor and the appropriate governing board and that meets the criteria set forth in section five of this article.
§18B-18A-3. West Virginia Research Trust Fund.
(a) There is hereby established in the State Treasury a special account designated the West Virginia Research Trust Fund.
(b) The fund shall consist of any moneys appropriated by the Legislature and any interest or other return on the moneys in the fund. Any moneys remaining in the account at the end of a fiscal year, including accrued interest, do not revert to the General Revenue Fund, but remain in the account.
(c) Based upon the amount of moneys appropriated for deposit into this account, the commission shall allocate seventy percent of such moneys for distribution to West Virginia University and thirty percent of such moneys for distribution to Marshall University. Subject to this allocation, moneys appropriated for deposit into this account shall be distributed by the commission in accordance with the provisions of section eight of this article.
(d) Investment earnings accruing in the account may be expended by the commission to:
(1) Cover all reasonable direct and indirect costs incurred in the administration of the provisions of this article: Provided, That the amount of investment earnings expended for such administrative costs shall not exceed two hundred fifty thousand dollars in any given fiscal year;
(2) Provide research grants to state colleges in accordance with the provisions of section ten of this article.
§18B-18A-4. Directed research endowments.
(a) The governing board of each participating institution is hereby authorized to create and administer one or more directed research endowments for the receipt of qualified private donations and the receipt of matching state moneys allocated for distribution to that institution.
(b) A directed research endowment shall consist of:
(1) Qualified private donations; and
(2) Matching moneys distributed by the commission from the fund in accordance with the provisions of section eight of this article.
(c) The governing board of a participating institution may invest moneys deposited into a directed research endowment with its nonprofit foundation that has been established to receive contributions exclusively for that institution: Provided, That any interest or investment earnings on the moneys invested shall be retained by the participating institution for the purposes set forth in this article: Provided, however, That any investments that are authorized by this subsection shall be made in accordance with and subject to the provisions of the Uniform Prudent Investor Act codified as article six-c, chapter forty-four of this code: Provided further, That any investments that are authorized by this subsection shall not be subject to the provisions of section twelve-d, article one, chapter twelve of this code.
(d) Investment earnings accruing to a participating institution's directed research endowment, hereinafter referred to as directed research endowment proceeds, may be expended by the governing board for one or more of the eligible uses designated in section six of this article: Provided, That the principal of a directed research endowment may not be expended for any purpose. The governing board of a participating institution may transfer directed research endowment proceeds to affiliated research corporations established pursuant to the provisions of article twelve of this chapter for one or more of the eligible uses designated in section six of this article.
(e) The governing board of a participating institution is exempt from liability for any loss or decrease in value of the assets or income of a directed research endowment, except as losses or decreases in value are shown to be the result of bad faith, gross negligence or intentional misconduct.
(f) The governing board of each participating institution shall adopt policies and procedures for the administration of directed research endowments consistent with the requirements of this article.
§18B-18A-5. Qualified private donations.
(a) Qualified private donations and qualified private donation pledges to a directed research endowment shall meet the following criteria:
(1) The donation or pledge shall be expressly and specifically restricted by the donor for one or more of the eligible uses designated in section six of this article: Provided, That nothing in this subdivision shall be construed to prohibit a participating institution from designating unrestricted gifts or bequests, or any portion thereof, for use as a qualified private donation;
(2) The donation or pledge, whether individually or bundled, shall be a minimum of fifty thousand dollars; and
(3) Donations or pledges may be accepted from individuals, partnerships, associations, public and private corporations, whether for profit or nonprofit, nongovernmental foundations, and hospitals.
(b) The following shall not be included as qualified private donations or qualified private donation pledges:
(1) Any donation or pledge received by an institution or its affiliated foundation prior to the effective date of this article;
(2) General funds, fees, tuition or other revenue generated by the institution of higher education;
(3) Proceeds from promissory notes, bonds, loans, or other instruments evidencing an indebtedness, or any other obligation of repayment by the governing board to the maker of such instrument;
(4) Any moneys or assets, other than donations or pledges meeting the criteria of subsection (a) of this section, received from the institution's affiliated nonprofit foundation; or
(5) Any other moneys received from the state or federal government.
(c) Each participating institution's affiliated nonprofit foundation that has been established to receive contributions exclusively for that institution, may transfer donations or pledges that it receives and that meet the criteria of this section to the applicable institution for deposit into a directed research endowment administered by such institution.
(d) The president of each participating institution or his or her designee, shall make the initial determination of whether a donation or pledge meets the criteria for qualified private donations or qualified private donation pledges as set forth in this section. The president shall provide periodic reports, at least annually each fiscal year, to the appropriate governing board regarding the amount of qualified private donations and qualified private donation pledges received.
§18B-18A-6. Eligible uses of directed research endowment proceeds.
(a) Directed research endowment proceeds may be expended by a participating institution, or transferred to the institution's affiliated research corporation, for any of the following designated uses:
(1) To pay the base salaries of newly-endowed department chairs, new professorship positions, new research scientists, and new research staff positions, including, but not limited to, research technicians and support personnel, and to fund affiliated graduate or undergraduate student research fellowships: Provided, That all such positions or fellowships shall be engaged primarily in one of the following areas of research: (A) Energy and environmental sciences; (B) Nanotechnology and materials science; (C) Biological, biotechnological and biomedical sciences; or (D) Biometrics, security, sensing and related identification technologies; or
(2) To purchase basic infrastructure directly related to an area of research identified in subdivision (1) of this subsection, including, but not limited to, laboratory and scientific equipment, and other essential equipment and materials.
(b) Eligibility criteria regarding the expenditure of directed endowment proceeds to pay the base salaries of personnel, to fund student fellowships, and to purchase basic infrastructure shall be established pursuant to guidelines and policies adopted by the commission in accordance with the provisions of section eleven of this article.
§18B-18A-7. Directed research endowment plans.
(a) To facilitate the goals of this article and to ensure the prudent expenditure of state moneys, the governing board of each participating institution shall submit to the commission a directed research endowment plan.
(b) The directed research endowment plan shall include, but not be limited to, the following:
(1) An assessment of the participating institution's current research initiatives, including any initiatives falling within an area of research identified in subdivision (1), subsection (a), section six of this article;
(2) A discussion of the manner in which those current research initiatives could be enhanced;
(3) A projected outline for the participating institution's proposed use(s) of directed research endowment proceeds, including the identification of any specific disciplinary hires, collaborations, or acquisitions currently under consideration;
(4) A list of prioritization of each proposed use contained in the plan, including the anticipated costs associated with each proposed use;
(5) A discussion of how the anticipated costs correspond to the directed research endowment proceeds expected to be available to the institution;
(6) An evaluation of how the plan furthers the goals of this article and addresses the research needs of the institution;
(7) The identification of those proposed uses for which alternative funding sources, other than qualified private donations, matching moneys from the fund, and the directed research endowment proceeds generated therefrom, may be sought to enhance the comprehensive research initiatives contemplated by the participating institution including, but not limited to, any funds received pursuant to the America Competes Act of 2007, Public Law 110-69; and
 (8) Notation of the amount allocated for distribution to the participating institution pursuant to subsection (c), section three of this article.
(c) The governing board of each participating institution shall submit its directed research endowment plan to the commission prior to submitting its first request for a distribution of matching moneys from the fund.
§18B-18A-8. Distribution of matching moneys.
(a) A participating institution seeking to receive a distribution of matching moneys from the fund shall obtain qualified private donations and/or qualified private donation pledges in an amount equal to the amount of matching moneys requested for distribution and shall submit a request to the commission setting forth the following:
(1) The proposed use of the directed research endowment proceeds and an evaluation of how such use furthers the goals of this article and addresses the research needs of the institution as identified in the directed research endowment plan submitted pursuant to section seven of this article;
(2) An evaluation of how the proposed use satisfies the criteria for the eligible uses of directed research endowment proceeds set forth in section six of this article;
(3) Designation of the applicable directed research endowment into which the requested matching moneys are to be distributed;
(4) Notation of the amount allocated for distribution to the participating institution pursuant to subsection (c), section three of this article and the amount of any previous distributions of matching moneys from the fund; and
(5) Notation of the amount of qualified private donations and/or qualified private donation pledges designated for use in requesting the distribution of matching moneys from the fund.
(b) The commission, working in conjunction with the state EPSCoR advisory council, shall review a request for distribution to evaluate the research, scientific, educational and economic merits of the request, to ensure compliance with the provisions of this article, and to ensure that the request furthers the research objectives of the institution, as identified in the directed research endowment plan submitted pursuant to the provisions of section seven of this article. The commission shall verify the amount of qualified private donations and/or qualified private donation pledges designated for use by the participating institution in submitting its request.
(c) Upon approval of a request by the commission, matching moneys from those allocated to the applicable institution shall be distributed to the applicable directed research endowment in an amount equal to the amount of qualified private donations and/or qualified private donation pledges identified in subdivision (5), subsection (a) of this section.
§18B-18A-9. Reallocation of matching moneys.
(a) Within five years from the effective date of this article, each participating institution shall have deposited into its directed research endowment(s) an amount of qualified private donations equal to or exceeding the total amount of moneys allocated for distribution to such institution pursuant to the provisions of subsection (c), section three of this article.
(b) If only one of the participating institutions fails to have deposited into its directed research endowment(s) the requisite amount of qualified private donations by the end of this five-year period, then the following provisions shall apply:
(1) Any portion of the moneys allocated to such institution that has not been distributed shall be reallocated for distribution to the other participating institution.
(2) If any donation or pledge previously used by such institution to receive a distribution of matching moneys from the fund has not been received in full by the end of this five-year period, then the participating institution shall return the unmatched portion of state moneys to the fund, which moneys shall be reallocated for distribution to the other participating institution.
(3) To be eligible to receive a distribution of reallocated moneys pursuant to this subsection, the other participating institution shall have qualified private donations in excess of the amount required by subsection (a) of this section deposited into its directed research endowment(s) in an amount equal to or exceeding the amount of reallocated moneys: Provided, That if the other participating institution does not have such excess qualified private donations on deposit, the reallocated moneys shall be made available for distribution by the commission to state colleges in accordance with the provisions of section ten of this article.
(c) If both participating institutions fail to have deposited into their respective directed research endowment(s) the requisite amount of qualified private donations by the end of this five-year period, then the following provisions shall apply:
(1) Any moneys remaining in the fund that have not been distributed shall be made available for distribution by the commission to state colleges in accordance with the provisions of section ten of this article.
(2) If any donation or pledge previously used by the participating institutions to receive a distribution of matching moneys from the fund has not been received in full by the end of this five-year period, then each participating institution shall return the unmatched portion of state moneys to the fund, which moneys shall be made available for distribution by the commission to state colleges in accordance with the provisions of section ten of this article.
§18B-18A-10. Distributions to state colleges.
(a) The commission may use a portion of those moneys derived from investment earnings accruing to the fund in accordance with the provisions of section three of this article, as well as moneys that are not distributed to participating institutions in accordance with the provisions of section nine of this article, to distribute state matching moneys to state colleges, as that term is defined in subsection (q), section two, article one of this chapter.
(b) The commission shall use the recommendations of the state EPSCoR advisory council in establishing criteria for the eligible use of moneys distributed pursuant to this section and in developing procedures for the competitive application and review of requests for funding submitted hereunder.
(c) To qualify for a distribution of state matching moneys pursuant to this section, a state college shall solicit qualified private donations in an amount equal to or exceeding the amount of matching moneys requested for distribution from the fund, shall establish a new account designated exclusively for the receipt of qualified private donations and matching moneys from the fund, and shall deposit the qualified private donations and any matching moneys distributed from the fund into such account.
(d) Investment earnings accruing to an account established pursuant to subsection (c) of this section shall be expended for a research-oriented initiative approved by the commission: Provided, That the principal of such an account may not be expended for any purpose.
§18B-18A-11. Duties of Higher Education Policy Commission.
The commission shall:
(1) Establish documentation standards and review procedures to determine whether a donation or pledge, when initially received or when the terms of such donation or pledge are materially altered, meets the criteria of a qualified private donation or qualified private donation pledge;
(2) Develop guidelines and procedures establishing eligibility criteria regarding the expenditure of directed endowment proceeds to pay the base salaries of personnel, to fund student fellowships, and to purchase basic infrastructure consistent with the provisions of section six of this article.
(3) Develop guidelines and procedures to ensure that directed research endowment proceeds are expended in compliance with this article; and
(4) Require each participating institution to report on the total amount of qualified private donations received, the investment earnings realized, and any anticipated expenditures from its directed research endowment(s) in its annual operating budget.
§18B-18A-12. Annual report.
Commencing on the first day of January, two thousand ten, and annually thereafter, the commission shall submit a report to the Governor, the President of the Senate, the Speaker of the House of Delegates, and the Legislative Oversight Commission on Education Accountability detailing the implementation of the directed research endowments at each participating institution, the amount of qualified private donations received by each participating institution in the preceding fiscal year, the amount of any distributions made from the fund, and a description of the scholarship or research supported by those moneys.



NOTE: The purpose of this bill is to establish directed research endowment funds at Marshall University and West Virginia University for the purpose of promoting research, scholarship, and economic development in certain areas of study. The bill establishes a program whereby eligible private donations are matched by the allocation and distribution of state moneys from the newly established West Virginia Research Trust Fund.

This article is new; therefore, strike-throughs and underscoring have been omitted.