But, she also signed two other bills created to make up that funding including allowing ball and dice gaming at Indian casinos and a bill requiring third party online retailers to collect and remit sales tax back to the state.
Teachers are urging lawmakers to pass new legislation, arguing that schools in the state need more funding.
"Eliminating the state capital gains tax deduction could threaten many of our state's family farms and ranches by forcing them to pay an additional tax on the sale of property they've worked hard for", said Oklahoma Farm Bureau President Rodd Moesel.
The Oklahoma strike comes amid a wave of action by teachers in states where budgets have been slashed, as measured by per-student spending, over the past decade.
The teacher walkout has rolled into Day 6 with momentum carried over from the weekend.
However, Republicans in the State House of Representatives don't appear to be listening.
Fallin, a lame-duck governor in her final year, has had scant success in recent years pushing her agenda, despite overwhelming GOP majorities in both chambers.
Teachers went on strike last week after lawmakers passed a funding package that offered only about $50 million for schools, where students have grappled with outdated, crumbling textbooks and shortened weeks, and many teachers have been forced to pay for school supplies out-of-pocket for years-even as they're paid some of the lowest education wages in the country.
Many teachers already are back at work, especially in rural communities where local boards didn't vote to shut down. That tax would have brought in an estimated $47 million annually.
Lynn said she misses her students. With demands for statewide strikes spreading from Kentucky, Arizona and SC to Florida, Iowa and Texas, the unions have warned teachers that strikes are illegal and would lead to "harsh consequences". "And, I think they'll be surprised because we're teachers, we're patient people". Supporters of the bill said the changes are necessary to save the state's pension systems.