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Three U.S. states miss budget deadlines, but risks low: Moody's

(Reuters) - Three U.S. states were late passing budgets this year, more than in either of the previous two years, but the risks of a state government shutdown or credit problems from the missed deadlines are low, Moody's Investors Service said on Wednesday.

Last year no state was late, while the year before only one state was tardy, Moody's said. Almost all states began fiscal 2014 on July 1.

The Massachusetts legislature passed its budget on the first day of the fiscal year, delayed by debate on transportation finance. The governor has until Friday to review the legislation, and the state has an interim spending measure in place.

The other two states with late budgets, North Carolina and Oregon, also passed spending patches as they debated budget issues. This is the second time in five years North Carolina has not approved its biennial budget on time, according to Moody's.

Temporary appropriations bills keep states from shutting down, Moody's said, and most states have established practices to make sure they cover debt service costs.

Debates about school funds, as well as an impasse over public pensions, has slowed budget approval in Oregon.

Revenue collected by states has been steadily improving for more than two years as the U.S. economy continues to pull away from the 2007-09 recession, shrinking budget gaps and replenishing reserves.

Expanding Medicaid, the health insurance program for the poor, funding transportation and spending on education have inspired state legislatures' biggest budget battles, according to Moody's. States are also facing demand to restore funds for cities and counties they cut during the worst of the recession.

(Reporting By Lisa Lambert in Washington; Editing by Leslie Adler)

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