A Labor Department proposal to repeal a Clinton-era regulation permitting states to use unemployment trust funds to offer paid parental leave would short-circuit several states' efforts to try the experiment.

In an announcement hailed by business groups, the department said last week that the deteriorating financial condition of many state unemployment funds made it essential to repeal the regulation to "protect the integrity" of the funds. At the end of last year, 28 states had minimal reserves in their unemployment trust funds, and at least six have trust fund balances so low they may need to borrow money from the federal government, the Labor statement said.

"Our first priority is to help laid-off workers and their families," added Emily Stover DeRocco, assistant secretary of labor for employment and training.

"Diverting money from unemployed workers and giving it to parents who take a voluntary leave of absence would have slashed holes in an important safety net for workers," Randel Johnson, the U.S. Chamber of Commerce's vice president for labor policy, said in a statement.

In 16 states, including Maryland, lawmakers had drafted legislation to use the unemployment funds to provide several months of income to workers who become parents. Four other states had commissioned studies to determine if the programs could be used in this way without endangering their trust funds.

"They are yanking it from us," said Florida state Sen. Debbie Wasserman-Schultz, a Democrat who had introduced such legislation in Florida, where she said it had gained bipartisan support. "They obviously don't think paid family leave is important."

Monica Halas, a senior attorney with Greater Boston Legal Services, said she was "very disappointed" with the Bush administration decision, noting that the Massachusetts legislature had approved using the funds for maternity leaves in 2000, although the governor vetoed the bill.

The United States is one of only two industrialized countries, along with Australia, that does not offer paid maternity leaves to parents. Until July, New Zealand was the third such country. In July, New Zealand began providing working mothers with 12 weeks of paid parental leave if they have worked for the same employer for one year or more. It applies to all women who either deliver or adopt a baby and who work at least 10 hours a week.

The Labor Department during the Clinton administration issued the rule, known as "baby unemployment insurance," in 2000. It permitted states to use their unemployment trust funds to offer partial wage replacement for parents taking leave to care for newborn or newly adopted infants. The 1930s law that created the unemployment program gave states flexibility in deciding who would receive benefits and how much they would get, but limited its use to workers who lose their jobs.

In announcing the repeal, Labor's DeRocco noted that no state had enacted legislation to allow the jobless funds to be used for parental leave.

Some child care advocates said it often takes two to three years for state legislatures to enact new programs. "We'll be strongly opposing this," said Judith L. Lichtman, president of the National Partnership for Women & Families, a nonprofit advocacy group that supports paid parental leave for working parents.

The comment period runs until Feb. 3.