56th LEGISLATURE
Governor Mary Fallin Delivers 2017 State of the State Address
Oklahoma Governor State of the State
6 February 2017
Governor Proposes Bold Reforms to Fix State’s Budget System; Calls for Eliminating State Sales Tax on Groceries, Corporate Income Tax and for Pay Raise for Teachers

OKLAHOMA CITY – Governor Mary Fallin today delivered the annual State of the State Address in front of a joint session of the Oklahoma Legislature. In it, Fallin focused on the urgent need to improve the state’s budgeting process to ensure that legislators can adequately fund priority goals related to education, public safety, health and the state’s infrastructure needs. Her State of the State Address can be found here. The proposed Executive Budget for Fiscal Year 2018 can be found here.

Modernizing Oklahoma’s Tax Laws

Fallin told lawmakers she is proposing a bold series of reforms to modernize the state’s tax laws and ensure new growth in years to come. These reforms will also ensure Oklahoma has the flexibility to prioritize spending as new needs emerge.

“This plan eliminates the most regressive tax on the books today, the state sales tax on groceries. This will benefit all Oklahomans. Eliminating the state sales tax on groceries is expected to result in annual savings of between $350 to $676 for a family of four.

“It also gets rid of one of the most volatile sources of revenue – the corporate income tax. It will reduce the paperwork and red tape burden of many small businesses in our state and boost economic development. Eliminating this tax provides more transparency as it also eliminates the need for the Legislature to pick winners and losers with specific tax credits.” – Governor Mary Fallin

The governor said that when the Legislature many decades ago first contemplated the sales tax laws to boost revenues, the economy depended on the manufacture and sale of goods. As the economy in the United States has shifted from a manufacturing-based economy to a services-based economy, the way we impose taxes and collect revenue no longer reflects the current economy, but an outdated system that has not changed much since its inception.

“By expanding the sales tax base, this allows us to eliminate the state sales tax on groceries and the corporate income tax. And it may be possible in the future to further lower the sales tax rate.” – Governor Mary Fallin

Calls on lawmakers to approve teacher pay raise

Fallin, for the second year in a row, challenged lawmakers to approve a pay raise for public school teachers.

“A thriving, prosperous economy must have a skilled, educated workforce. That starts with good teachers in the classrooms providing our children a quality education FIVE days a week. And my budget provides both.

“In a recent meeting I hosted with major national site selection companies, an executive asked me how he could persuade businesses to come to Oklahoma when some of our schools have four-day education weeks. We must have five-day school weeks.

“Let’s act on a permanent pay raise for our public school teachers. It is what the public and families want. The pay raise may need to be phased in and it may be targeted, but it must be done.” – Governor Mary Fallin

But the governor said a pay raise alone will not improve student outcomes. Administrative inefficiencies must be addressed.

“We have a very top-heavy system that needs to be reformed to provide teachers and students more resources. The state already provides a number of services that schools could voluntarily take advantage of to save money, such as IT services, purchasing and bonding assistance.

“In addition, I am creating a task force to review the state education funding formula, evaluate funding sources, and analyze the K-12 system footprint. Just as we must fix our own state budget structural issues, we must do the same with the K-12 education system.

“Our education system must be focused on creating the best outcomes. To do so, we must ensure more money goes to our classrooms and teachers. We must empower students and parents by giving them more choices so they can best address their own needs.” – Governor Mary Fallin

Personal consumption tax on cigarettes

Fallin again asked legislators to raise the cigarette tax.

”To improve the health of our state, I’m also once again asking you to raise our cigarette tax. Smoking remains the Number One preventable cause of death in Oklahoma. It costs our state $1.62 billion in health care costs. The revenue raised can be spent on current health care needs.” – Governor Mary Fallin

Directing gasoline and diesel tax revenue goes to roads and bridges

The governor said her reform plan calls for gasoline and diesel fuel taxes to go roads and bridges

“My plan will ensure taxes associated with roads and bridges are the funding source for maintenance of roads and bridges – period, returning individual income taxes to the General Revenue Fund. This plan does not impact the projects in the Department of Transportation’s 8-year plan.

“Oklahoma currently ranks 48th in diesel tax in the nation and 49th in gasoline tax. I am proposing a new revenue stream by increasing our gas and diesel taxes to the regional state average, but still below the national average.

“As we’ve discussed for decades, let’s put the fuel taxes into roads and bridges.” – Governor Mary Fallin

Criminal justice reforms

Fallin asked lawmakers to invest in ways to be smarter on crime and tough on true criminals.

“It’s no secret our prison population is in a crisis with over 61,000 people under the jurisdiction of corrections. Our prisons are way over capacity, and our prison population is expected to grow by 25 percent in the next 10 years.

“Oklahoma’s overall incarceration rate is the second-highest in the country. We lead the nation in female incarceration – incarcerating women at two and a half times the national average.” – Governor Mary Fallin

Without reform, Oklahoma must build or lease three new prisons. The governor created the Oklahoma Justice Reform Task Force to find data-driven, smart-on-crime policies to focus on improving public safety.

“Seventy-five percent of new admissions in prison are nonviolent offenders. The number of drug-possession offenders sentenced to prison with no prior convictions has more than doubled the last five years. My budget includes new money for corrections and treatment, which includes a $50 million bond issue to build wings on a men’s and a women’s prison for substance abuse offenders and rehabilitation.” – Governor Mary Fallin

Other highlights

The governor, during her speech, recognized seven Oklahoma Highway Patrol troopers who apprehended a killer last fall in a rural area in Custer County. They were troopers Brian Costanza, Chris Hanover, Trenton Keasler, Brandon Seward and Micah Whittington along with helicopter pilots Capt. Brian Sturgill and Cole Patterson.

Fallin also said the state’s crumbling infrastructure should no longer be ignored. She has identified Oklahoma’s most urgent, pressing infrastructure needs along with a bond proposal to address them. They include a new Department of Health lab, which is needed for accreditation, and improving facilities for corrections, mental health and juvenile affairs.

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