By Joe Biesk
The Associated Press

FRANKFORT - Gov. Ernie Fletcher emerged from a closed-door meeting with House lawmakers Wednesday and said they were "inching forward" to an agreement on a tax plan and budget.

"There was some progress," Fletcher told reporters while leaving the meeting. "We discussed several items ... we're inching forward, and so I'm still guardedly optimistic."

The meeting marked the second time within a week Fletcher has met with members of the Democrat-controlled House in hopes of breaking the budget gridlock. The governor met with both House Republicans and Democrats each time.

Neither the governor nor lawmakers would discuss any specifics of the negotiations.

However, House Speaker Jody Richards said there were "potential areas of agreements" that would require more discussions.

"Both sides have agreed to look at the other's point of view on four or five issues," Richards, D-Bowling Green, said.

Among those are changes to the state's taxes on telecommunication services - including satellite TV - and the income threshold at which low-income families are taxed, Richards said.

The governor said the once politically charged atmosphere between the two sides has mellowed.

"It's positive, it's moving forward and I was very pleased with the meeting," Fletcher said.

Richards concurred, saying it was a "more cordial atmosphere than any of the previous meetings."

"I certainly do believe that the atmosphere here is improving all the time and the governor obviously wants to work with us and we want to work with the governor," Richards said.

Any agreement has to have the Senate's blessing before he'd call lawmakers back to Frankfort for a special session, Fletcher said.

"There's still a lot of hurdles that have to be overcome," Fletcher told reporters.

Fletcher said there were likely to be some "staff-to-staff" meetings between the House and the governor's office before they meet again.

State Rep. Bob DeWeese, R-Louisville, who sat in on the negotiations, said he thought the two sides were the closest they'd been since January.

"That does not mean we're going to reach an agreement," DeWeese said. "But I think there are things that are being discussed. No one has said no yet."

The 2004 General Assembly adjourned in April without a budget for the fiscal year that started July 1. Fletcher has been operating state government on an executive spending plan since the start of the month.

Fletcher's ability to spend state money without a budget is being challenged in court.