7 U.S. states borrowing to pay jobless benefits

NEW YORK, Feb 6 (Reuters) - Seven U.S. states have been forced to borrow from the federal government to cover the rising cost of unemployment benefits, the National Conference of State Legislatures said on Friday.

Michigan already owes the government more than $1 billion, the bipartisan organization said in a statement.

The other states that have been forced to borrow are California, Ohio, New York, South Carolina, Indiana and Kentucky.

“Kentucky is in dire straits,” said Brent Yonts, chair of the NCSL Labor and Economic Development Committee and representative for Kentucky.

“We’ve got to look at the whole system because the whole system is collapsing, just like everything else.”

Kentucky’s jobless rate stands at 7.8 percent, above the national average of 7.6 percent released in a government report earlier Friday.

Fourteen states have jobless rates that exceed 7.6 percent, with Michigan, Rhode Island and Puerto Rico showing rates higher than 10 percent.

“No one anticipated this type of increase that would put such a strain on state unemployment systems,” said Diana Hinton Noel, a labor analyst for the NCSL.

States pay for jobless benefits by levying payroll taxes on employers. These are deposited into the federal Unemployment Trust Fund, which keeps separate accounts for each state, plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

Individual state accounts are fast dwindling as job losses shrink payroll tax revenue.

The Department of Labor earlier reported that 598,000 jobs were lost in January. More than 3.5 million jobs were lost in 2008 and more than 11 million Americans are unemployed. For more, see [ID:nN06471726].

Reporting by Ciara Linnane; Editing by Chizu Nomiyama