UPDATE 2-Massachusetts House approves bill on Kennedy seat

* House approves bill for interim senator, Senate to vote * Basketball tycoon Pagliuca enters race for Senate seat (Adds bill to go to Senate Friday; quote in paragraph 9)

By Kevin McNicholas

BOSTON, Sept 17 (Reuters) - Massachusetts Representatives voted on Thursday in favor of a bill allowing the governor to name a temporary replacement to fill the late Edward Kennedy's U.S. Senate seat as the battle over healthcare rages.

The bill will pass on Friday to the 40-seat state Senate, where the vote promises to be much closer and the minority Republicans have vowed to use stalling tactics to delay it.

State representatives voted 97 to 58 in favor of the legislation, which would fill Kennedy's seat with an interim successor until a Jan. 19 special election to find a replacement until 2012.

Kennedy was a towering figure in the U.S. Senate for nearly half a century who made healthcare reform his signature issue. His death in August from cancer deprived the Democrats of a crucial 60 votes in the chamber.

The Democratic Party, which is loath to leave that crucial seat vacant during the healthcare debate, overwhelmingly controls the Massachusetts legislature. But deep local divisions over the bill have complicated its passage.

Many Democratic lawmakers in the state have sided with Republicans to vote against it.

Representative David Flynn urged legislators before the vote to grant what he called Kennedy's "deathbed wish" to name an interim senator who could help President Barack Obama's chances of overhauling the $2.5 trillion healthcare system.

Kennedy wrote a letter shortly before his death pushing for the legislation. If approved by the state Senate, the law will let Massachusetts Governor Deval Patrick pick a temporary successor to Kennedy within days.

"Right now, the feeling is amongst the membership that we do need that second voice in Washington, D.C., for a whole host of reasons," said Representative Michael Moran.

PAGLIUCA TO RUN

Separately, basketball tycoon and private equity investor Stephen Pagliuca, a self-described progressive Democrat, said he will seek the Democratic nomination to run in the Jan. 21 election to replace Kennedy.

Pagliuca, a multi-millionaire and co-owner of the Boston Celtics basketball team who is little known among Massachusetts voters, took a leave of absence on Thursday as a partner of private equity firm Bain Capital to start his campaign.

He will be running against Democratic state Attorney General Martha Coakley, who polls rank as favorite. Media reports say Democratic U.S. Representative Mike Capuano also plans to run for the seat, which the Democrats are unlikely to lose.

The January special election has been overshadowed so far by the wrangling over whether to pick an interim senator.

State House representatives voted on Thursday to remove a stipulation in the bill that an interim senator would have to be from the same political party as the person they replace, saying that clause would be unconstitutional.

A separate resolution would "strongly discourage" the appointee from running for the permanent seat in January.

Some state Democrats worry that public opinion opposes what amounts to reversing a law taking away the state governor's power of appointment which they drew up in 2004 to prevent a Republican governor from appointing someone to Senator John Kerry's seat had he won the presidential election.

They fear a move that will benefit the party short-term will alienate voters ahead of January's special election.

Yet weighing on them is the risk of leaving Obama short of the Senate majority he needs to thwart Republican blocking maneuvers on a healthcare overhaul he wants to pass this year. (Writing by Catherine Bremer; Editing by Cynthia Osterman)