This is a rush transcript from "Your World With Neil Cavuto," September 3, 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, to Rhode Island right now, the governor just saying that he's going to have to lay off 1,000 workers after a judge just sided with unions there and blocked a government shutdown he had planned for tomorrow.

Rhode Island Governor Don Carcieri joining me right now on the phone.

Governor, you wanted to shut down, temporarily, the government to save money, because you said that the till has run dry. Judge said you can't. Now you're going to lay these workers off. How bad is this getting?

GOV. DONALD CARCIERI (R), RHODE ISLAND: Well, it is so bad, we need you back in Rhode Island, Neil.

(LAUGHTER)

CAVUTO: A beautiful state, but, man, oh, man, our littlest state has some of the biggest problems. What is going on?

CARCIERI: Well, it's really — it's very, very sad, actually, because what we have been trying to do — you know, I have said, Neil, look, every household out there today, as you know, is really consolidating, trying to figure out how to save money, get by on less, paying down debt. All of those things have a knockdown effect on the economy.

Every business I know is doing the same thing. They expect their government to do the same thing, you know, figure out how to run more efficiently, on less, et cetera.

And so one of the things we did this year, and a part to get us through, was actually 12 shutdown days which I had laid out a whole schedule of, the first one of which was to be tomorrow — and, you know, not the preferential way, Neil.

I have been — we have been in negotiations with our unions, trying to convince them that, look, the better, smoother, fairer way to do this would be for the unions just to agree to take unpaid days, because you're going to have, within certain unions, when you shut down, some people have to work, the state police, the corrections officers, the hospital...

CAVUTO: Right. Right.

CARCIERI: ... all of those. So, you're going to have people, some people that are working being paid, some in the same union that are not and not being paid. That's not fair.

CAVUTO: But, Governor, you know, obviously, the judge thought that you could not legally do this. So, can you legally lay off 1,000 folks?

CARCIERI: Oh, yes, there is no question we can do that. Under the legal contracts in existence, the governor has the authority to lay off, Neil. There is no — no doubt about that.

CAVUTO: Now, how long would they be laid...

CARCIERI: What the judge said today, by the way...

CAVUTO: I'm sorry, Governor.

How long would they be laid off?

CARCIERI: No, they would be laid off, you know — well, I say permanently, until this economy starts to recover, and there is an opportunity, the revenues start to improve.

I don't know what you see. I heard your commentary — your commentary with your previous guest. And, you know, from my experience, frankly, the stimulus has had little impact in our state. And by way of the nation, I agree with you.

CAVUTO: So, Governor, could I — could I ask you this?

(CROSSTALK)

CARCIERI: If there's going to be a hero right now, it's the Fed that stopped the bleeding, stabilized this economy.

CAVUTO: Well, you could be right about that.

But let me ask you, Governor. You're playing with fire here in a state that — you know, just ask Newt Gingrich. When you try to entice the government getting shut down, it can come back to bite you, right?

I mean, and are you afraid here that the public will take this out on you and think, well, we — he is really taking a drastic action here...

CARCIERI: Actually, the opposite.

CAVUTO: ... and now he's laying off people, and now some of our vital services might be compromised, and this could zoom on you?

CARCIERI: Well, actually, the opposite has been the case.

CAVUTO: Go ahead.

CARCIERI: Actually — no, actually, the opposite has been the case, Neil.

Virtually — the vast majority of the feedback from the public is — is, they understand. You know, they understand that you have got to find a way to save money at the state level. By the way, I think we should be doing the same thing at city and town level.

So, they're sympathetic. They understand that. I have not had much feedback at all, frankly, of great concern. Some expect, OK, if you're going to need to register your car on certain days — we're only talking about days — and we schedule these around holidays. For example, we have got Labor Day on Monday, so we picked tomorrow.

The day after Thanksgiving, most people are not working anyway. So, we tried to select the days...

CAVUTO: Right. Right.

CARCIERI: ... so they would have little — you know, minimum impact on the public.

CAVUTO: I see.

CARCIERI: And this is all — you know. Listen, we are in tough times. And you need to figure out how to manage your way through this process. And that is all I am trying to do, without being more of a burden on the taxpayers, because I have got a whole contingent in the legislature that would like to raise taxes.

And I'm saying, you can't do that. People are struggling right now.

CAVUTO: Governor Carcieri, very good having you. We're going to watch this very closely. Thanks for joining us.

CARCIERI: My pleasure, Neil.

CAVUTO: All right.

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