JEFFERSON CITY - Missouri taxpayers will have to pay more than half a billion dollars into a pension fund for state employees during the next two years.

The state will have to kick in $375 million this current budget year and even more next year, according to State Budget Director Lina Luebbering. But how much the retirement fund will require next year still in doubt.

The state employee retirement system, one of the state's two pension funds, lost 19.1 percent on investments for the year beginning June 30, 2008, said Christine Rackers, manager of investing policy and communication for the system.

To offset this loss in money, state tax funds may need to contribute anywhere between 1.5 to 20 percent more in Missouri's next budget, depending on how the fund's board of trustees decides to budget for the increase.

Exactly how much money will be required from state's general revenue fund will be determined at a Sept. 17 meeting of the retirement systems board of trustees. Every 1 percent of increased taxpayer funding for the system equals about $20 million, said Kelvin Simmons, a member of the board and commissioner of the office of administration.  More than half of this will come from the state's General Revenue fund.

Simmons cited a process called "economic smoothing" as one option to lessen the immediate budgetary impact of a rate increase. For the smoothing process to work, investments eventually need to reach a positive rate of return, Simmons said, however, that investment growth has averaged over 8 percent over the last 12 years.

There has already been some favorable returns in the system since March, Rackers said.  If this continues, the rate might not increase as much, Simmons said.

"I'm an eternal optimist," said Simmons, who expects the taxpayer contribution increase to be closer to 1.5 percent.

State Sen. Jason Crowell, R-Cape Girardeau and a member of the pension fund's board, is not as optimistic. "Kelvin's job is to save money," Crowell said.

Smoothing is "pushing off to a future generation the cost to fund it today," Crowell said adding that without smoothing the fund will require an increase of 20 percent, or $65 to $85 million in additional funds.

"If an 'A' is defined as 95-100 percent, and then one semester no one gets an A, do you change it?," Crowell asked comparing a move to smoothing  to education. "What you value [the A] at will mean nothing. Suddenly the A student doing brain surgery on you is really a D or F student. We need to set one policy in place and lock it in, otherwise it's susceptible to manipulation."

Under smoothing, the state's pension fund would end up "like Enron," Crowell said, where the money to pay benefits is "not there 20 years from now."

The legislature needs "bite the bullet" and pay now, but have a serious discussion about changes, including employee contribution, Crowell said.

Simmons said, "All options are on the table" when it comes to options such as employee contributions.

Currently, state employees are not required to pay into their pension fund. There is "no way to have a benefit without employees having skin in the game," Crowell said.

The retirement system for the Missouri Department of Transportation and Highway Patrol Employees lost almost 25 percent on its investments last year, said Susie Dahl, executive director of system.

To make up for lost funds, the system will use the gas tax that funds the transportation department, not general taxpayer funds, Dahl said.

Projected transportation projects would not be affected, Department Finance Director Ben Reeser said.