This is a rush transcript from "Hannity," March 1, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: The massive pro-union protests moved today from Wisconsin to Ohio. Now that state's two year budget deficit stands at a staggering eight billion dollars. And in an effort to bring that down, GOP Governor John Kasich is pushing a bill that would limit the collective bargaining rights of many state workers.

Now Ohio State Senate had set to vote on this bill this week. And like in Wisconsin, this is not going over very well with union protesters and they are out there taking to the streets voicing their anger. They are calling this, quote, "a rally to save Ohio's middle class." That's ironic, that according to the Bureau of Economic Analysis, Ohio is one of 41 states, including Wisconsin, where public workers make more money on average than those in the private sector.

Now Wisconsin Governor Scott Walker has yet to give in to the protests in his state. So, will Ohio's governor show the same determination?

Joining me now with reaction is the man himself, Ohio's Republican Governor John Kasich is with us. Governor, good to see you, thanks for being with us.

GOV. JOHN KASICH, R-OHIO: Good to see you, Sean.

HANNITY: I did notice that your predecessor, Strickland referred to you as a tyrant. But that's probably, you know, compared to what Scott Walker is being called, maybe you are not living up to the Walker tradition, you haven't been called Hitler yet as far as I can tell.

KASICH: Yes, you know, Sean, the deal here is Ohio, we've lost 600,000 jobs in the last 10 years, and 400,000 jobs in the last four years. A third of our college students leave after three years. The city of Cincinnati, you are going be to stunned when I tell you this, has lost 40 percent of its population since 1950, and Youngstown and Cleveland lost half of their population since 1950, and a lot of our job creators leave Ohio because they are looking to get lower costs.

So, you know, with this collective bargaining bill is all part of a major reform package that I'm going to introduce on March the 15th. You want to be there, you want to take a look at this package. We'll be reforming everything from higher Ed to K-12 Education, to Medicaid, to the way our prisons work. All these things are part of a package to set a stage, Sean, for entrepreneurship, risk taking and most important job creation, so that Ohio can be prosperous again. And all I'm fighting here is joblessness and poverty. And I'm going to do everything I can to get us moving in the right direction.

HANNITY: Governor, if you've got an eight billion dollar shortfall, eight billion dollars, that's a lot of money. You talk about the population, the demographic shift away from your state, you're talking about college graduates leaving in droves. How to you overcome an eight billion dollar shortfall? How many years you are planning on doing this in?

KASICH: Well, you know, Sean, the situation is, we have to balance every year. And we will get this budget balanced. Then we are not only going to balance the budget but we are going to preserve the tax cut that we received in January. Our income tax now is under six percent. We've also passed a bill in the first thirty days to privatize our development department, so we can move at the speed of business not at the speed of bureaucracy. We're also on the verge of passing a bill that will allow us to eliminate silly rules and regulations that get in the way of small business.

So, we have a major reform agenda. And we will also restructure a lot of the operations of government. You know, this government has become calcified, slow, tired. And so, a lot of reform is going to take us a long way.

For example, Sean, if you have a mom and she wants to stay at home rather than to go and do more an expensive nursing home setting, where she will be more comfortable and we'll save money, we are going to do that. We are going to make reforms that are going to make sense, strip politics out like I did when I was budget committee chairman, and deliver a balanced budget -- have the tax cut and set the stage for economic growth. Because everything in Ohio will be better when jobs are created. Our schools, our communities, our hospitals, that's what we are trying to do. It worked under Reagan. It worked when I was chairman of the budget committee. It will work in Ohio again.

HANNITY: You are talking about a top to bottom total reform of the way things are done, the bureaucracy, you're going to shift the top to bottom.

KASICH: Correct.

HANNITY: All right. There's usually a lag time between --by the time you make the cuts. How do you make Ohio more business friendly environment? How do you entice business to come into Ohio? How do you do that?

KASICH: Well, first of all, they can't believe that a governor actually returns their calls, CEOs, and understands something about business. Because I've been in politics and in business and that's the formula we need in politicians, people that have had success in politics but people that understand and had success in business.

Secondly Sean, by privatizing our development department, we are now going to hire people that actually understand these different sectors and energy, and in areas like health care, biometrics, all these different kinds of things that we have in this state we are now going to exploit them. We are going to leverage them to attract more businesses.

But Sean, we have to stabilize the patient in Ohio. And we are about to pass legislation that's going to provide the incentives to keep a couple of our major companies in Ohio. So, it is being business-friendly. It's understanding how CEOs think, the job creators. It's understanding small business, they have a seat at the table. Sean, it's a complete makeover for the state of Ohio. And over time, it will bring great progress to our great state, which has been under attack.

HANNITY: So, you think you can save eight billion dollars, say, top to bottom reform prisons, reform the educational department, health care, care for the elderly, mental -- people with mental problems. You can reform all of this in -- what period of time?


KASICH: Yes, we can get our budget in balance --

HANNITY: Think you can budget the balance in two years?

KASICH: No, we have to balance each year.

HANNITY: But how did you get an $8 billion shortfall then?

KASICH: Well, because people used to some degree, it is because stimulus money was used to run our government and it has run out. And on top of that, of course, when you lose all those jobs you lose revenue. But what we were faced with Sean, when we came in, is a state of Ohio that hadn't been reformed for so long it was amazing.

So, look, it is true, there are going to be some cuts. That's why we need to give managers and taxpayers at the local level the tools to deal with less money. The first year will be difficult. The second year will be easier. But we have to do this. We don't have any choice. We can't raise taxes, Sean, we're already, our costs are too high.

So, it is Indiana, North Carolina, South Carolina, it is Texas, they all come to our state and take our jobs. And they try to get companies to leave. I'm tired of starting on the five yard line. I've got to reduce our costs, become competitive, you know, train our workers, use our great university system and leverage some of the great assets we have in Ohio.

And this is nothing -- hey Sean, this is nothing more than the way I watched Ronald Reagan do this to revive our country. If you give people a reason to invest, to risk-take, if you give small businesses a chance to be successful, to promote entrepreneurship, you see people want to create things. We are going to let them do it again in Ohio in 21st century thinking.

HANNITY: Oh, I've got to tell you something, if this is a success that I anticipate it will be, it will be a model for other states in the country. I'd hate to see cities that I love in Ohio become like Detroit where they are bulldozing entire neighborhoods because half the population of the city left this once great city. So, governor, we wish you all the best.

KASICH: Sean, you know, a big key to this is you cannot let politics stand in the way. You have to look at things intellectually, honestly. You got to put the people first, you got to think about the kids and you got to remember that if you create prosperity, so many of your problems are eliminated, and poverty brings you nothing but bad. And that's why I'm so committed to this agenda and this program.

HANNITY: All right. Governor, we are going to keep following what hopefully will be the Ohio miracle.

KASICH: I hope so.

HANNITY: Good to see you.

KASICH: Thank you.

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