In a 33-minute speech Monday to kick off the 2019 legislative session, Gov. Kevin Stitt filled in some details on how his administration intends to make Oklahoma a national leader in education and business recruitment and improve government accountability.
Stitt used his first State of the State address to call for an additional pay raise for teachers, a more modernized state government and greater control over state agency leaders’ employment.
What was absent, however, might be as important as what was included. Stitt spoke of shoring up the state’s Rainy Day Fund in order to prudently use the extra money that last year’s tax increases brought in. But he didn’t call for a rollback of the taxes, as some critics feared.
His call for more money for teachers, while appealing to many, doesn’t address many educators’ calls for more classroom spending. And the realities of criminal justice reform could hit a wall with district attorneys’ resistance and the fact that the state will likely need new prisons regardless of what the Legislature does.
Here are excerpts from the written speech and Oklahoma Watch reporters’ annotations.
It is such an honor to be with you today. I’d like to take a moment to recognize the honored guests with us:
Lieutenant Governor Matt Pinnell, statewide elected officials, President Pro Temp Greg Treat, Speaker Charles McCall, Speaker Pro Temp Harold Wright, members of the 57th Legislature, cabinet members, Chief Justice Noma Gurich and members of the Oklahoma Supreme Court, tribal leaders, friends, guests, my beloved First Lady – Sarah, my six children, my parents, and the most important audience – my fellow Oklahomans.
Stitt isn’t the only new face at the Capitol. This will also be the first session for Pinnell, several other statewide officials and a host of new lawmakers, with 46 new lawmakers in the 101-seat House and 12 in the 48-seat Senate.
I stand before you today to offer a vision for Oklahoma’s future that gives purpose and direction for how our new administration will lead the state. My vision for Oklahoma is very clear and simple: to make Oklahoma Top Ten. My purpose is to work with you to deliver a turnaround that ensures a better future for all four million Oklahomans. I believe it is a purpose we all share in this room today.
Before we get into the details of my very first budget, I want to discuss how we position Oklahoma well for a “turnaround” by defining the term and the expectations for this vision.
Stitt repeatedly spoke about the need for a “turnaround” and his goal to make Oklahoma a “top 10” state on the campaign trail. He has also frequently tried to distance himself from fellow Republican and former Gov. Mary Fallin, and her eight years in office. Instead of hoping to build upon her work, Stitt offers something of a rebuke of her time in office by speaking of the need for a turnaround and a new way of governing.
Oklahoma’s “turnaround” is when our state stops moving in the direction of decline and begins moving in the direction we want to go: to be Top Ten in the nation. To get there, it will require three steps:
First – We must bring together people from across the state, with various backgrounds, skills and talents, to serve in critical leadership roles.
Stitt has tapped into private-sector expertise to fill many of his top jobs. But not all of his appointees are political newcomers. Michael Junk, Stitt’s chief of staff, was Tulsa’s deputy mayor, and Stitt’s choice for secretary of state and education (and liaison to the Legislature), Michael Rogers, was a state representative from Broken Arrow and chair of the House Education Committee.
Second – We must set measurable goals and put metrics in place so every state employee, agency leader, member of my administration, and each of you in our Legislature can be part of one team with one vision.
Third – We must hold ourselves responsible for delivering results and reimagine the possibilities. I’ve said it before, Oklahoma’s challenges are no different than any other state – and Oklahoma’s opportunities, I believe, are the best in the nation.
Going through this process will put Oklahoma on the path to be Top Ten. And if anyone thinks that becoming Top Ten is just a campaign slogan, let me tell you, this turnaround is already under way with individuals who are delivering Top Ten outcomes in their own classrooms, communities, and industries.
Being top 10 could mean a number of things. In education, it could mean teacher pay or classroom spending. It could mean class sizes or test scores – or, for that matter, the magnitude of a rise in test scores. In business recruitment, it could mean the size of a closing fund or the success of such an incentive. Stitt didn’t include a boost in classroom spending with his call for a teacher pay raise and has offered few details so far on other aspects of his top 10 ambitions.
Consider Donna Gradel – An environmental teacher in Broken Arrow Public Schools. Two weeks ago, she was named one of the Top Four teachers in the nation. Donna reimagined the classroom. She moved beyond the textbook by taking her classroom outside to partner with the city of Broken Arrow to clean public water and by taking the classroom to the world by developing a system to provide sustainable food sources to orphans in Kenya.
Donna, thank you for being here today.
Consider the Gathering Place – USA Today named it the number one place in America to visit in 2019. It is an example of public-private partnership. Where 55 acres stretched across the Tulsa river front, the George Kaiser Family Foundation reimagined a free park that is bringing together all ages, races, and categories of people to enjoy Tulsa.
Consider the Oklahoma Youth Expo Community. In the early 2000s, this youth livestock show was struggling to survive, but donors, Oklahoma families, and the Legislature came together, assessed their resources, and reimagined the program. Today, OYE is not just the #1 junior livestock show in America, it is the largest in the world. Today, OYE garners young participants from all 77 counties, awards hundreds of thousands of dollars in education scholarships and has shown a $22 million economic impact on Oklahoma City.
These are just a few examples of Oklahomans who brought together a team, set measurable goals, reimagined the possibilities, and executed on their vision to deliver Top Ten results.
Today, as I present my first budget, I ask you to join me in reimagining. Today, as we consider the state of our state, Oklahomans are presented with revenue growth of potentially $600 million, a 3.6 percent unemployment rate, rising wages and a spirit of optimism.
This is the first time in several years that Oklahoma has a surplus instead of facing a budget shortfall at the start of a legislative session. But how much money policymakers will have to save or spend won’t be known until the Board of Equalization meets to certify the final revenue figures later this month. State budget officials expect a drop in drilling activity due to falling oil prices over the past several weeks and months, which could cause the state’s surplus to be reduced by $50 million to $150 million.
This is because of Oklahomans who are working hard, taking risks, opening new businesses, and creating jobs. The government does not create wealth, only the private sector can. In my administration, every policy decision will promote a healthy economy.
Stitt, who created Gateway Mortgage Group and grew it into a national mortgage lender and servicer, has spoken repeatedly of the private sector’s role in job creation and his experience in employing thousands. In saying that a focus on economic health will underpin policy decisions, Stitt seems to be saying he wouldn’t look kindly on tougher regulations when they come at the expense of business growth.
I want to also recognize President Pro Temp Greg Treat and Speaker Charles McCall who provided committed leadership over the past few years to make hard decisions to demonstrate our state’s support of core services that Oklahomans and job creators rely on. As I promised on the campaign trail, I brought them in to our process of reimagining the budget.
The House, Senate and governor’s office typically work behind the scenes to negotiate the final budget and make sure there is a plan that can pass both chambers and win the governor’s blessing. This was, at times, a contentious process when Fallin was office. But Senate President Pro Tem Greg Treat, R-Oklahoma City, said after Stitt’s speech that lawmakers are hopeful and that “there is a renewed sense of optimism and excitement at the Capitol.”
As I outline my administration’s priorities this year, I want to make it clear: as elected officials, we will not always agree on the specifics of every policy – and that’s ok. We are each elected for different reasons and because of specific issues.
But you will always find my office willing to work with you and to be open minded on policy differences, because what unites us in this room is that we are committed to reimagining how we can do state government better and deliver a brighter future for Oklahomans.
First, let’s reimagine state government. Our state Constitution vests supreme executive power in the Office of the Governor, but too often that executive power has been delegated by statute to boards that are not directly accountable to the citizens of Oklahoma. State government today is much larger than it was 112 years ago. As a result, accountability for those in power is spread too thin and, at times, it seems as of no one is really in charge.
The Health Department’s crisis in 2017 taught us this lesson, and the Legislature wisely restructured the agency’s board into an advisory role and gave the executive branch the authority to fire and hire a new leader. Let’s not wait for another crisis to start making this necessary reform across our largest agencies.
The Legislature made an emergency appropriation of $30 million last year to the Health Department. A grand jury report and investigative audit later found out that money wasn’t needed and the agency had not been honest about its finances. The agency hasn’t spent the money, and Stitt wants to take it back to pay for performance audits at nine more agencies under the Agency Performance and Accountability Commission and use the rest of the funds for economic development through the governor’s Quick Action Closing Fund.
Oklahomans want three things: accountability, transparency, and results. I know the legislature wants it too.
Both Senate and House leadership are committed to addressing the structure of our state’s largest agencies so that government is held more accountable to the people. By granting the governor hiring authority, you will know exactly where the buck stops – at my desk.
Stitt wants to be able to appoint directors for the following agencies: Oklahoma Health Care Authority, Department of Corrections, Office of Juvenile Affairs, Department of Mental Health and Substance Abuse Services and Department of Transportation. The governor already has the authority to appoint the commissioner at the state Health Department and the Department of Human Services, as well as some executive positions like adjutant general and emergency management. Although supporters say the governor should have a say who is in charge of state agencies, there likely will be resistance among those who feel an appointed board or commission can offer more expertise in these decisions and shield agency heads from political pressure.
But reform should not stop here. We will also seek to remove board members across state government when they have conflicts of interest. And we will look to sunset and consolidate boards and commissions where there is overlap and duplication. This is common sense reform.
My budget will prioritize funding to continue performance audits of the top 12 agencies. We will fund this effort by immediately recalling the $30 million that was given to the Health Department after the agency misrepresented their financial standing to the Legislature.
The Agency Performance and Accountability Commission, a group lawmakers formed in 2017, spent more than $1.3 million to audit the Department of Corrections, District Attorneys Council, Department of Public Safety, Office of Management and Enterprise Services, Oklahoma Tax Commission and Office of Juvenile Affairs. Stitt wants to expand that work to the Oklahoma Health Care Authority, Department of Education, Department of Human Services, Department of Transportation, State Regents for Higher Education, Department of Mental Health and Substance Abuse Services, Department of Health, Department of Career and Technology Education and the Department of Veterans Affairs. The governor’s office hasn’t said how much it expects the audits will cost.
We will also reimagine state government so that our customers – Oklahoma taxpayers – are the primary focus. This is why I have placed a special emphasis in my administration on the digital transformation of state agencies. Today, I am calling for the Legislature to fund a $20 million grant program where agencies can apply to receive funds to bring their services into the 21stCentury and to make government more customer-centered and efficient.
Imagine digital driver licenses that are Real ID compliant. Imagine titles available electronically. Imagine one site to obtain occupational licenses and one site to pay taxes. It is time to get it done.
The Legislature had balked at Real ID drivers licenses before authorizing the Department of Public Safety to comply with the act in 2017. However, the licenses won’t be ready until at least 2020, when system upgrades and security measures are expected to be completed. In the meantime, Oklahoma has been seeking extension and the state faces another deadline in October to bring its license into compliance with the federal law.
It is time to improve our government’s “D+” ranking in digital transparency and for the state government’s checkbook to be online, up to date, and easy to navigate. It is time for an online dashboard where you can monitor my administration’s progress on performance metrics we will set for delivering state services.
Turning our attention to education, my administration is committed to public education and understands that the large majority of our students attend public schools.
Over the next few years, we will move the needle in outcomes. We will set high standards. We will enact reforms. We will invest in the classroom.
But we must first continue our investment in the teacher, because it’s not programs, curriculum, or resources that students will remember. The magic happens between the student and the teacher in the classroom.
We are confronted with a nationwide teacher shortage. This is not a problem unique to our state, but Oklahoma was among the hardest hit. With recent revenue growth, I ask the Legislature to bring our teachers to number one in our region in pay and benefits. This amounts to a $1,200 increase per teacher.
This is less than the Oklahoma Education Association’s ask of $3,000. But the state Education Department’s budget request doesn’t include a pay raise, instead focusing on operational dollars to reduce class sizes.
I am also calling for the Legislature to funds a bonus recruitment program, up to $5 million, to encourage certified teachers to stay in Oklahoma after graduating college, to return to the classroom after a hiatus, or to move to Oklahoma for the first time.
I applaud Representative Rhonda Baker’s collaboration to get this effort underway, and I appreciate House Minority Leader Emily Virgin and her caucus for their support of a continued pay increases for our teachers.
We must also standardize the certification test for Oklahoma’s teachers, get rid of the five-year renewal fee, and reduce unnecessary paperwork and bureaucracy on high-performing schools and instead shift resources to help schools who need it the most.
Stitt is said to be a fan of moving Oklahoma to the Praxis, which is the exam used by most other states.
But these reforms and continued investment from the state will not be enough to make Oklahoma’s education system competitive. We must do the hard work of reimagining education.
Consider Cecilia Robinson-Woods, the Superintendent of the Millwood School District in Oklahoma City. After assessing the resources and unique challenges of her district, Cecilia reimagined ways to recruit and retain talent in her classrooms. It was important that teachers were not just skilled in their profession, but that they also were passionate leaders who could shape the culture of their schools and district. Cecilia partnered with Teach for America, utilized opportunities offered under state law, and implemented a new reading program. Today, the Millwood School District has seen dramatic, positive progress in outcomes.
The opportunities Stitt is referring to here are converting to a charter school, which Millwood did in 2017 to retain emergency-certified teachers who were unable to get certified after two years.
Cecilia, thank you for being here today.
State Superintendent Joy Hofmeister Responds to Speech
We must also look at ways to better stabilize the funding of public education. The fact that Texas is preparing to pass a teacher pay increase – at a cost of $3.7 billion – compels us to review and reform our state’s funding formula and to take the handcuffs off local communities wanting to compete, recruit, and retain the very best teachers. We must chart a bold course that allows for communities to do more for their students without being penalized with the loss of state support.
A legislative task force studied the education funding formula last year. The funding formula has not been changed since the early 1980s.
Critics say allowing local districts more flexibility on how they spend their money leads to unequal funding and more inequities in educational opportunities.
State government cannot fix education’s funding needs alone. We must stand arm-in-arm with communities, cities, and counties. Oklahoma is stronger when we are all working together.
The process of reforming the formula demands a reimagining of school districts so we can ensure not just equal funding per student, but also equal opportunity. This will take time to study what other states are doing, what is working, and what challenges we must address that are unique to Oklahoma. I am committed to be a continuous learner in this area and a leader in the discussion.
We must not forget that education should be first and foremost about our students, not about systems. I will sign into law any legislation that seeks to break down the silos between common education, career techs, and higher education so that we can better align the education experience for Oklahoma’s children and prepare them for tomorrow’s workforce of machinists, computer programmers, engineers, and more.
Next, let us take a moment to reimagine our state’s criminal justice system. We are number one in the nation for incarceration. To move the needle, it will require us to change the way we see the person who is in a cycle of incarceration for non-violent crimes.
Stitt has been a vocal supporter of criminal justice reform, saying Oklahoma should work to bring its incarceration rate closer to those of its peers.
Many years ago, I was introduced to Melinda who held the titles of daughter, mom, and fellow Oklahoman – but to the prison system, she was a drug offender. When I met her, she was looking for hope, for a better life for her son, and for an opportunity to change course.
Today, she has been an employee at Gateway for more than 13 years. Her entry into the workforce was key to remaining sober and to becoming a thriving individual in our society. Melinda’s story of redemption was possible because of a community of people who stepped in, walked with her, and gave her opportunity.
Melinda, you are why I believe in second chances. Thank you for being here today.
There can be more stories of redemption like hers. It is why my budget requests:
$1.5 million to Women in Recovery, a public-private partnership to help women identify the roots of their addictions and develop life skills, and $10 million to the County Community Safety Investment Fund, a criminal justice reform initiative the people of Oklahoma approved with SQ 781.
But money is not the sole action government must take. I am encouraged by legislation in the House to accomplish licensing reform for those with a felony. We must give Oklahomans re-entering society more opportunities to be gainfully employed and we must give employers more discretion on who they can hire.
Fallin issued an executive order in 2016 prohibiting state agencies from asking about applicants’ criminal histories on job applications.
We must also remember the people who work hard every day to keep our correctional facilities clean, safe, and operating. They are on the front lines of delivering core government services, and as revenue continues to improve, I urge us to consider ways we can better improve their work conditions and compensation.
In my budget, we will also use revenue growth to address two critical healthcare programs in Oklahoma: The Graduate Medical Expense Program to train doctors, a cost of $62 million, and the Children’s Health Insurance Program, a cost of $14.8 million.
These programs remind us why we must be judicious and thoughtful about seeking federal funds. In Fiscal Year 2020, these two programs alone will cost the State of Oklahoma $77 million that the federal government once paid – a 6.8 percent increase to the healthcare authority’s budget. When Washington, D.C. wants to end a program, we are left holding the bag and covering the cost.
In late 2017, the state lost its waiver that allowed it to attract extra federal funds under Medicaid for medical schools at the University of Oklahoma and Oklahoma State University.
While Medicaid expansion currently stops at a 90 percent federal match, we cannot assume that it will remain this high forever. The estimated $150 million price tag today for Oklahoma to expand Medicaid could leave us down the road fronting more than $1 billion when the federal government pulls back on its commitment. They’ve done it before and they will do it again.
There have been mixed messages on Stitt’s openness to Medicaid expansion. He’s been against it on the campaign trail, but said he was somewhat open to new ways of attracting more federal money for Medicaid at an Associated Press legislative forum last week. However, he seemed in the State of the State speech to the slam the door on Medicaid expansion in Oklahoma.
Medicaid is the fastest growing expense in our state budget, and before we commit our state to accepting even more Medicaid dollars, Oklahomans deserve accountability and transparency with our state’s management of the Healthcare Authority.
Oklahoma is the only state in the nation where the governor does not have the authority to provide oversight of this agency. We are sticking out like a sore thumb, and this must change.
Healthcare is also preventative, promoting wellness through education, personal responsibility, and raising awareness. Today, I am announcing my partnership with the Oklahoma City Memorial Marathon to hold a Governor’s Relay Challenge, and I invite you to join me! I’ll be forming my own team to compete in the relay, and the team that wins will join me for lunch at the Governor’s Mansion later this year.
Stitt did not mention mental health directly in his address and his budget proposed no funding change for the state mental health department, at $337 million. He did speak of drug addiction and criminal justice reform. His wife, Sarah Stitt, has said mental health will be a priority as First Lady. She reiterated that after the speech:
Let’s now move to the economy. In order to make our efforts in state government sustainable, we must first grow Oklahoma. We need more taxpayers, not more taxes.
During his gubernatorial campaign, Stitt became one of the most vocal candidates speaking out against tax increases. In addition to signing former U.S. Sen. Tom Coburn’s seven-point “Taxpayer Platform,” which calls for limited government and fair taxation, Stitt also said last year’s teacher pay raises could have been passed without increasing taxes. In his first budget, at least, Stitt lives up to his talk as his budget doesn’t call for tax increases or major revenue-raising policies.
We will reimagine our economy by diversifying our marketplace, strengthening our workforce, and encouraging Oklahomans to start new businesses. Our rules must be clear, our regulations must make sense, and our tax code must remain competitive with our neighbors.
At the Department of Commerce, I have hired the very best talent in the state to lead this critical agency, and they have set measurable goals and are running hard to tell the world Oklahoma is open for business.
Oklahoma’s Quick Action Closing Fund has spent more than $10 million on six projects since 2013, according to the Department of Commerce. This hasn’t been a priority to fund as the state faced a succession of budget shortfalls.
To best equip the agency’s mission, I ask the Legislature to support additional funds for the governor’s Quick Action Closing Fund. Since its inception, the state has granted $11 million in total awards which attracted high paying jobs with the Macy’s large distribution center in Owasso, with Boeing’s relocation of the Aircraft Modernization and Sustainment business unit, and with the Commercial Metals Company in Durant and many more.
Stitt wasn’t explicit about the use of tax incentives on the campaign trail, but his budget book includes a section on the various income tax credits, deductions and exemptions in the state’s tax code. They total about $1.5 billion. Another $985 million is in sales tax exemptions.
Today, the balance of Oklahoma’s Quick Action Closing Fund is $4.3 million. By comparison, the latest legislative report for the Texas Enterprise Fund indicates the state has awarded $609 million from its Quick Action Closing Fund, resulting in 94,347 jobs. In Arkansas, their fund has awarded over $120 million, resulting in 26,684 jobs.
You can help me sign on the dotted line for new opportunities to grow Oklahoma and demonstrate to the nation that Oklahoma is not afraid to compete with our neighbors and that we intend to win!
As we close our time together, let’s end by reimagining our state budget. I promised Oklahomans that we would get to the bottom of every tax dollar and I promised to be transparent and open about the budget process.
For the first time in recent history, the governor’s budget provides you with every tax dollar we could find across the 12 largest agencies, which are spending 90 percent of the state’s total budget. It is important we talk in total dollars. This was the one consistent request I heard from Oklahomans across the campaign trail.
Total state expenditures, which include general appropriations, apportionments, agency
service charges and federal grants were $17.3 billion as of last year. But state appropriations — money that the Legislature gets to direct — was $7.5 billion of that.
In this budget packet I have also included agencies’ current performance goals. As we move forward together this year, my administration will be working with agencies to hire the best people, raise accountability, and deliver measurable results.
My vision for the budget is for it to become a meaningful resource each year, to establish a common language for lawmakers and tax payers and create a transparent budget process.
Now, as we dig into the numbers, instead of across the board increases in FY’20, my budget addresses more than $230 million in obligations and another $151 million in critical needs.
The obligations Stitt is referring to include about $100 million in ad valorem reimbursement to local school districts, $62.8 million that the federal government clawed back as part of a dispute over Oklahoma’s use of the money to help fund graduate medical education, about $20 million for teacher flexible benefit allowances, $19.3 million for the Capitol renovation, $14.8 million for the Children’s Health Insurance Program, $7.1 million for debt service obligations and $12.8 million to rebuild the state’s medical lab.
My budget also casts a bold goal for our state’s savings account, I have said often why I believe the state needs $2 billion in savings.
When we look at states where the economy depends on the price of oil, they place a strong emphasis on saving during the good years. One thing we know is true, oil prices are going to go up and oil prices are going to go down.
When energy prices tumble, it directly impacts the state’s Sales Tax collection, the state’s Income Tax collection, the Gross Production Tax, and various other revenue streams. We must be honest with ourselves and recognize that last year’s tax increases made us more dependent on the price of oil. We must be good fiscal stewards of this decision by creating more stability through savings.
Stitt seems to allay concerns that he would support rolling back last spring’s tax increases.
At the end of FY’19, our Rainy-Day Fund will have approximately $874 million with no additional support from a stabilization fund often seen in oil-rich states. Meanwhile, Texas has $12.5 billion in total savings to weather another economic downturn. North Dakota’s total savings is more than $5.8 billion.
The governor’s budget staff said they’d like to increase the Rainy Day Fund cap to 30 percent of the revenue estimate for the general revenue fund, up from 15 percent now. That change would require voter approval in a state question.
This is why I am setting a goal for Oklahoma to have $1 billion in our savings by the end of FY’20. To get there, we must set aside an additional $250 million from revenue growth.
Stitt’s proposal to save the $250 million instead of spending it on immediate needs is expected to be a contentious issue this year. Although Republican leaders applauded this conservative approach, House Minority Leader Rep. Emily Virgin, D-Norman, said that money could be used to further boost education spending or pay for health, corrections and other state needs.
Being conservative with our budget surplus today will protect Oklahoma from having to cut core services in the future.
As I close, let us remember, the future doesn’t just happen. We make it happen. As public servants, our responsibility and purpose are to ensure a better future for all four million Oklahomans. This will require us to be good listeners, continuous learners, committed communicators, and bold leaders – both inside the building and around the state.
Our vision is to make Oklahoma Top Ten.
Join me! As we work together, we will move our whole state forward.
God bless you and God bless the State of Oklahoma!