Kelly retired as the president and CEO of GVEA in 2000, and was working as a commuter airline pilot for Tanana Air Service at the time of his election to the State House.

This angered the old-timer and conservative constituencies who originally voted for him, as he mainly talked about building large-scale development projects.

He defeated Schaeffer Cox, a 24-year-old carpenter who would later become better known for his involvement in the militia movement, by an approximately 51 to 36 percent margin.

In the general election, he was re-elected by only 4 votes against Karl Kassel, who had recently retired as head of parks and recreation for the Fairbanks North Star Borough.

Kelly and his wife Cherie had five children, Roxanne, Shannon, Erin, Cecilia and James, as well as 12 grandchildren.