DES MOINES, Iowa (AP) -

A fund established by the Legislature in 2002 to attract investors in Iowa start-up companies will cost taxpayers $26 million.

The Des Moines Register reports the Iowa Fund of Funds was designed to encourage investors with tax credits to be used if they lost money or didn't get their expected returns.

Lack of investors prompted a change in 2005 allowing the credits to guarantee bank loans. The loan money was invested in venture capital funds, which were to return money back to the fund as investments paid off. It didn't work well and was made worse by the 2008 financial meltdown. Two banks holding loans sued the state in April after the fund defaulted on loans.

The state negotiated a deal to repay $4 million annually over six years.