This is a rush transcript from "On the Record ," March 11, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: What would you do with $4.6 billion? Well, that's how much the state of Minnesota expects to get from the $787 billion stimulus package. So here's the question. How is Minnesota going to spend all that money? The governor of Minnesota, Tim Pawlenty, joins us live. Welcome, Governor.

GOV. TIM PAWLENTY (R), MINNESOTA: Good to see you, Greta. Glad to be on the show.

VAN SUSTEREN: Governor, so you're getting $4.6 billion. When did you find out that that's the number you were going to get?

PAWLENTY: Well, the estimates came out some weeks ago, but the final part of it came out a short time ago and now we're getting the details.

VAN SUSTEREN: All right, so how do you decide what to do with your $4.6 billion? I mean, do you make that decision? Do you sit down with a big chart? Who makes that decision?

PAWLENTY: Greta, it's basically been made for us because the federal government is telling us how to spend the money by category. And even within the category they're putting strings attached to it. So they're not giving us a lot of flexibility as to where the money goes. As to that $4.6 billion in Minnesota, it breaks down about $1.8 billion is going into Medicaid programs, about $800 million going into schools, about another half a billion going into roads and bridges. The rest goes into other miscellaneous categories. But it's not as if we can just sit down and spend it however we want. They basically told us how you can spend it.

VAN SUSTEREN: All right, let's take -- let's take bridges, which, boy, I know you guys could use some bridge repair out there. I went out there, reported on a bad bridge there. But will there be competitive bidding? Is that required under this, so that at least you're going to get the best deal or the smartest deal? May not be the lowest price because it might be better to choose a higher price, but is it competitive bidding?

PAWLENTY: Absolutely it's competitive building. In fact, the first round of contracts are going to be noticed in Minnesota here very shortly, and we expect the responses to come in shortly and get to turning dirt quick. But we absolutely will use competitive bidding. That's required by state law. It's good practice. And by the way, construction prices, because of the economy, are actually more reasonable than they were not too long ago.

VAN SUSTEREN: You say there are strings attached to some of the money you're getting from the feds. What kind of strings? And does it in any way create a problem for you because I would think that you'd be happy to get $4.6 billion to help your state out.

Watch Greta's interview with Gov. Pawlenty

PAWLENTY: Well, Minnesota is unlike some other states because we're a major net payer of the bill, Greta. We -- for every dollar we send to Washington, we only get 72 cents back. On that measurement, we're the fifth lowest recipient of federal money. That's very different than other states. So we're a big payer of this bill, so we don't feel bad about taking our share of it. And we'll put it to good use. We'll be sure of that.

But in terms of the strings attached, as you mentioned, for example, if we take the $1.8 billion in Medicaid money, they're saying, You can't change Medicaid eligibility. That's unfortunate because that program is bankrupting or will bankrupt the federal government and many states. It's one of our fastest-growing out-of-control programs and it has to be reformed. And they're saying you can't change eligibility. In schools, for example, they're saying you can't reduce school funding beyond the amount that you spent in a certain year. We weren't going to do that anyhow, so it doesn't create a problem for us. But those are the kinds of benchmarks or hurdles that they're putting up in the bill.

VAN SUSTEREN: All right, so you caught my attention with this fact that for every dollar that Minnesota contributes that you only get 72 cents back, so it seems like it's a net loss of 28 cents on the dollar to you. Is that -- I mean, how do you figure that out because that's sort of striking because there must be some states that are going to have -- for every dollars, they're going to get $1.25 back.

PAWLENTY: There's no question about it. I won't name names, but there are many states around the country who are net receivers of federal money on that same measurement. And there's third parties who calculate that, that statistic I gave you I think is from the Tax Foundation, and they do that annually or so.

VAN SUSTEREN: Well, let me ask you about the two -- of course, the states that catch most of my attention being Nevada, where Senator Reid is from, and also the state of California, because that's where the Speaker's from. And of course, they're the two leaders of the two houses. Are they coming out ahead or behind like Minnesotans? How are they doing on this, do you know?

PAWLENTY: Well, I don't have that list in front of me, but if I had to take a guess, I would say California is a net recipient and Nevada I'm not sure, but I suspect they may be on the recipient side, as well. But a lot of the states around the country that are, you know, less prosperous are also net recipients of federal money, and maybe for some of that, there's good reason as a -- but I'll tell you, the micromanagement that's going on from Washington not only in this bill but in so many other aspects of the state-federal relationship, makes me sad, Greta. We don't have many people left who are appreciative of states' rights and why states were founded in the first place, and we're getting micromanaged from Washington on everything.

VAN SUSTEREN: Thank you, Governor.



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