This is a partial transcript from the April 27, 2005 edition of "Hannity & Colmes," that has been edited for clarity.

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SEAN HANNITY, HOST: Governor, great to see you again. Thanks for being with us.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: Well, it's great to do another interview with you. This is terrific, Sean.

HANNITY: We appreciate it. You know, a lot can happen in a month, since I've seen you last. You actually told me the last time I saw you that, as governor now — and you had a lot of great jobs in your life — that it's the greatest job you've ever had. You've never come under fire like this, and the last month in particular. Is it still the greatest job you've ever had?

SCHWARZENEGGER: It is the greatest job that I've ever had. It's the most challenging one. It is, at the same time, the most rewarding one. You know, I knew — and I told you that a month ago and I said this during my State of the State Address in January that as soon as you try to do reform, and serious reform, you're going to, you know, rattle the cage. And all the special interests and the unions are going to come after you.

So it was expected, all the stuff that is going on, that they would spend millions and millions of dollars to destroy my character, to destroy, you know, my programs and the various different reforms and all those things. And that's what they do, because they have to protect and hold on to the things that they want.

Because remember, that the same people that have created the problems that we have now cannot fix it. Einstein says it is the same people who create the problem cannot fix it. And so, therefore, I have to do everything I can and go to the people, reach out to the people and say, "I need your help."

And this is why, with the people together, we can accomplish the reforms.

HANNITY: Do you care that your numbers go down? Because your approval ratings have come down a little bit. Does that bother you? Does that concern you? You said, "This was predictable," meaning the attacks against you, the campaign against you.

SCHWARZENEGGER: Sean, we all like to have the perfect approval ratings...


HANNITY: I like my ratings to always be high.

SCHWARZENEGGER: Yes, exactly. And so do I. But if that's what it takes in order to get the reforms, and if that's what it takes to get the job done, I'm more than happy to take that. It's as simple as that, because I knew — when you look back in history, if it was Jerry Brown, if it was Don Majon, Pete Wilson, Russ Davies, every one of them, whenever they made a decision that was a tough decision, that special interests and the unions came out and they bombarded them, and they protested. And their approval ratings went down.

Wilson was down in the 20s. And then when everything was reformed the way he wanted it, his ratings shot up and he won against, you know, Mrs. Brown. That is the things that you do.

I mean, you have to go and be able to fight that and not have, you know, thin skin. You have to have thick skin. And just to fight through the — I'm totally committed, because I know it's the best for California to have the budget reform, to have the pension reform, the education reform, and the redistricting. We need that.

As I always said, the only way we can rebuild California is when we first reform California.

HANNITY: All right. We're going to get to all of those initiatives one-by-one, because I know people want to know the status of all of them.

You've tried to make it sort of a fingerprint of your administration to reach out to Democrats and Republicans. How do you work with people that say you declared war on the people of California, stop Arnold, all the things you just heard?

SCHWARZENEGGER: Well, first of all, what I've heard is unimpressive speakers. But that's besides the point.

The bottom line really is you can't take those conventions that seriously. You know, you can't go and say the Democrats are saying all those things, because I think the Republicans say things — you know, it's where the party gets together, and where you feed the red meat stuff.

And so, you know, the Republicans say certain things that drives the Democrats crazy. And the Democrats get together and do the same things. Forget all that. This is just rhetoric. It's dialogue. Each one of them wants to run for office and all those kind of things. So that doesn't make any difference to me.

What is important is that Democrats and Republicans get together and solve the problems. Because as I said from January on, I said, "Come down to our office. Let's get both of the parties together, because that's why everyone has been sent here to this capital, to fix problems. And if you cannot do it, and if you don't come down, then I'll ask the people for their help. If you don't do the job, the people of California will."

And that's exactly what we're going to do. If they don't come down and negotiate, then we will go and hold a special election and we ask the people. Because I know the people are on our side. If you look at the polls, they like all of the various different reforms. They are 100 percent behind us.

HANNITY: What is the status of — you have four proposals, four reforms. What is the status of them now? The last time we spoke, it was clear you put out the same challenge. Either you guys come up here, you negotiate in good faith, and you see how they're negotiating, or you're going to go directly to the people of California.

SCHWARZENEGGER: Well, four months has gone by since by State of the State Address. And they have not come down with one single proposal. They've come down to test us. They've come down to see if we are vulnerable. They've come to see how we're doing with our polls or with our signature gathering.

They've done all of that, but no one has said, "Governor, your idea is a little bit too far. Can we meet here? This is our idea."

HANNITY: Nobody?

SCHWARZENEGGER: None. Absolutely none. They've done everything else. Another thing they haven't done is their work. They have done their work upstairs, with whatever it is, including working very hard on our prison reform, which has just passed on a bipartisan vote, unanimous, and through the committee, and also a unanimous vote in the little Hoover commission that was sent down to the legislators.

They got together, and you solved the problem. You have now the first step towards prison reform, which is very important. And I want to congratulate both parties for that.

And now the thing is, let's use that as a way of getting it started and get the momentum going, and come down, and let's negotiate.

HANNITY: I want to get into this with more specificity, but as you listen to the rhetoric, do you stop and think, "Maybe I made some mistakes"? Do you think you've made any mistakes?

SCHWARZENEGGER: No, I think that there is no mistakes there. I mean, the bottom line is, we need the reforms that we have, and that I'm more than willing to sit down with them and to lay out programs and to make compromises as we did on workers' compensation.

But I think that so many of those politicians here in this building have to get a signal from the unions and from the special interests in order to come down. And they told them — they said, "Just hold off with the negotiations. Don't negotiate. Let us beat up on Arnold first. Let us bring his poll numbers down. Let us spend millions and millions of dollars" — which is money that they're taking from the poor teachers that are out there teaching — the union grabs, and then they put it on television, and wasted on television spots and all that stuff.

So that's what they're doing. And they think that I will now go and say, "Oh, my god. They're running TV spots against me. I'm going to change my mind. I'm going to go the other direction. I'm going to just throw everything away. Forget the reforms."

Not this guy. Because I'm not the unions' governor. I'm not the special interests' governor. I'm the people's governor. I do what is best for California.

HANNITY: Governor, you said as we were closing out the last segment, you're not the unions' governor, you're the people's governor. I was talking to a friend of mine here in Sacramento — you know Tom Sullivan from KFBK...


HANNITY: He said, "When all is said and done, the estimates are they're going to spend $200 million in these attack ads against you." So you have four proposals, budget reform, pension reform, education reform, redistricting reform. Are you backing off of any of these at all?


HANNITY: Have you changed your strategy in any way?

SCHWARZENEGGER: Absolutely not.

HANNITY: It's all going to go to the ballot if they don't negotiate?

SCHWARZENEGGER: No. The only thing that does not go to the ballot — or would go to the ballot the next time is the pension reform, because there was a concern amongst the firefighters and the law enforcement community that our pension reform includes to take away the death benefits and the disability benefits, which it doesn't.

But because there was a confusion, and the people that have supported me during the campaign, that have been big supporters — and I admire the law enforcement community. My father was, you know, a police officer. And I love the heroic firemen and — so I felt like if they had a concern about that, they shouldn't have a concern.

They shouldn't worry about this. Let's just rewrite and tighten the language and situate it. It makes it very clear it's not including death benefits and disability benefits. And then we would submit it again for the next ballot or we negotiate it right here. But we have to bring stability into the pension system.

HANNITY: But even, I know, on the budget reform that some Republicans — you have an automatic trigger if they started spending too much. Why would Republicans oppose that?

SCHWARZENEGGER: Well, they want to make it even tougher. And I feel sometimes that it doesn't leave you enough flexibility if you want to then create new programs, and infrastructure, and transportation. So it doesn't give you that leeway. So that's why I wanted to go with something that is a happy medium.

But you know, you never can please everybody. It's the same thing as with the redistricting. You know, we have Democrats and Republicans — the politicians, not the people out there — the politicians that are against the redistricting. Why? Because they wanted to draw the district lines.

HANNITY: That's the redistricting?

SCHWARZENEGGER: If you fix the system...


HANNITY: They always get re-elected.

SCHWARZENEGGER: Exactly. That's right. They wanted to shoo themselves in. They wanted to build a castle that locks themselves in and locks the people out. What I want to do is to create the reform that is a panel of retired judges that draws the district lines so that it protects the voters, not the incumbents.

That's what we want to change. That's what our reform is about. Common Cause loved our reforms, have endorsed our reforms, and so therefore — it's specifically the redistricting reform — and so we're going to move forward with that, also.

HANNITY: So we talked about the budget. We talked about redistricting. We're putting the pension plan off to deal with the concerns for the firemen and the policemen.

Now you have education, where you proposed combat...

SCHWARZENEGGER: Yes, but let me just say something about our budget reform. It is just such a simple thing to say that we should only spend what we have. What they are used to hear is, "Every dollar that comes in, they want to spend a $1.10."

And I said, "Look, this is the — we have to live within our means." We teach our children to live within their means and to just spend the money that they have. And we should demand it from the government. Don't spend money you don't have. It's that simple.

And what our budget reform just simply says this. Anytime that spending goes above our revenues, let's cut across and let's just live within our means. It's that simple.

HANNITY: That's all it is?

SCHWARZENEGGER: It's a no-brainer. But they don't like it, because they're big spenders...


HANNITY: I do that at my house.

SCHWARZENEGGER: They're spending addicts, and now they are just frustrated about this because they can't spend what they want.

And look what happened today. Don Perata, Senate pro tem, has already announced and said, "I want to increase taxes by $4 billion." Now, imagine that the only answer they have here is always, "Increase taxes. Increase taxes."

I say to them, "Guys, this is not your money. This is not the government's money. It is the people's money, the taxpayer's money. You've got to spend money wisely and live within your means." Don't always go back to the people and say, "Let's tax the rich. Let's tax the people. Let's tax more. Let's raise the taxes."

We don't have a revenue problem. We have all the revenues we need. We have a spending problem. And it's as simple as that.

HANNITY: You think it will come to the ballot initiative? We only have 30 seconds left in this segment. Do you think there's any chance they're going to come up and negotiate on these terms?

SCHWARZENEGGER: I think there's a chance. Last year, they came up when they had all the signatures together on workers' comp reform. They negotiated, and we had great reform that has created 20 percent...


HANNITY: How are the signatures now?

SCHWARZENEGGER: Terrific. Within the next 10 days, we have all the signatures...

HANNITY: Everything?

SCHWARZENEGGER: We have everything.

HANNITY: All three ballots...


HANNITY: And then you'll deal with the next one?

SCHWARZENEGGER: Absolutely. And we will declare victory on that, and then we move on. It's up to them if they want to come to negotiate.

But like I said many times, the train has left the station. You can be part of it or you can get run over. It's one or the other.

HANNITY: Governor, the last reform that we haven't discussed is education. I did some reading about the state of California's educational system here.

Of the 50 largest districts, 42, when you look at them, have — in terms that they spend less on teacher salary in the low-income schools. And you are offering what you're calling "combat pay" for teachers who will go into some of the tougher school districts.

Explain that.

SCHWARZENEGGER: Well, first of all, Sean, the problem we have is that we're spending $50 billion on education, which is almost half of our entire budget. We increased education spending this year by $3 billion. And what did we get?

We have 30 percent of our kids that are, you know, dropping out of school. We have hundreds of schools that are failing. And we have 50 percent or more of the kids that are performing below grade level. This is totally unacceptable.

There has to be more accountability for the money that we give. That's what the fight is all about.

Number two, we have a lot of inner-city schools that are not really getting the same education that other schools are getting. I've settled, as you remember last time, the lawsuits, the Williams lawsuit.

For five years, they were fighting in this state, you know, about this case, should the kids get equal education or not? They were fighting it for five years. The ACLU was suing the state, saying, "You're not giving all the kids equal education." And we were fighting it and spending $20 million.

I came into office. I say, "We settle it, because it is true. We are not giving equal education to our kids in our inner cities or in our (UNINTELLIGIBLE) schools." So we've got to give them the equal books. We've got to give them the equal homework material. We've got to give them also the qualified teachers.

And if teachers feel reluctant to go there, then let's give them combat pay, for lack of a better word, pay bonuses, something that gets the best teachers from Beverly Hills from the school that maybe they've been teaching for 15 years, and is in Beverly Hills school because of seniority, let's get that teacher over to a school where they have problems, where they have English as a second language, where there is behavioral problems, educational problems, and all of those things. Let's get them there, and let's give them extra bonuses.

The union says, "No." The union says, "You cannot give extra money to any teacher. You cannot offer merit pay," or anything like this. I think those are the obstacles that we face. We want accountability. We want the best teachers to get paid more. And let's get rid of the bad teachers.

That's what our kids deserve. Our kids deserve the best teachers and the best education, and that's what I'm fighting for.

HANNITY: And you'll put that on the budget — you'll put that on the ballot, as well?

SCHWARZENEGGER: And also part of our negotiations.


HANNITY: And part of the negotiations.


HANNITY: Let me move onto the issue of immigration. You used the term, "Close the border." You meant, "Secure the border." Democrats attacked you for misspeaking in that particular case. What is your position on immigration, clearly?

SCHWARZENEGGER: Well, first of all, anyone that complained about what I said, "Close the border," knows that what I meant was secure the borders. Because close the borders means that you cannot travel in and out, and not even visitors.

So of course, I don't mean that, because we have a great trade relationship with Mexico and with Canada. And I think that you have to get the goods in and out. And we have great relationships in general.

What we want to do is, we want to secure the borders so that we don't have this unbelievable increase of illegal immigrants coming into the border. And I don't blame the Mexicans, the poor people that are struggling down there, from coming in, because I would want to do the same thing. If I can't do it legally, I'll do it illegally, or try.

But what I am complaining about is that our government here in America is not doing their job which is to secure the borders.

That is their job, to secure the borders so that that does not happen in the first place. And we see it daily. On your program yesterday we saw it, how they come in. How they have water stations there, and all of those things. That is terrible and the people of America are very upset about that. That's the bottom line.

They're not upset about the…

HANNITY: The security issue.

SCHWARZENEGGER: … Mexicans trying to come in.

HANNITY: It's not about work.

SCHWARZENEGGER: But it's just about they do not secure the borders.

HANNITY: With all that you're going through, and you seem as confident as I've ever seen you in terms of this is your agenda and you're going to fight for it, will you announce now that you're going to run for re-election?

SCHWARZENEGGER: Well, I'll maybe do it someday that I will announce if I'm running or not running. So that…

HANNITY: You're not going to do it…

SCHWARZENEGGER: … I would not do it…

HANNITY: You've got to do it on this show, not…


HANNITY: … Jay Leno's show next time.

SCHWARZENEGGER: No, no, I will do it on your show. But I mean, I really don't know because, as I've told you, we talked about it just before this interview, that what is important for more always is I'm very, very focused. And this year I'm only focusing on thing and it is reforms.

We want to go and focus and reforms and then prepare the next year for looking at health care and looking at infrastructure of transportation and other important issues.

HANNITY: How's the impact on your family? I've been reading that Maria is playing a more active role in your job and what you're doing. How's the impact on her?

SCHWARZENEGGER: First of all, let me correct that. Not making a correction to you, because you are just saying it — what you read, but the fact of the matter is Maria was always part of everything that I do. If it was in show business, if it was in body-building, if it was in politics with the President's Council on Fitness, with the afterschool programs that she's sitting on the board, Maria is my partner.

I have the smartest woman that I'm married with — married to, and therefore I've utilized and take any of (INAUDIBLE) anytime.


HANNITY: … the following.

SCHWARZENEGGER: Exactly, so nothing has changed there. That's all part of trying to derail my reforms and trying to derail me. So pay no attention to that.

The second thing is, it is tough for her because she takes those things much more seriously, I mean, they write something negative, she gets upset about it. So I think that she is much more vulnerable than I am. I don't pay that much attention to it, I mean, because I am a person that looks at the finished game, at what is the goal? I only look at the goal and that's the bottom.

So it is tough on her, but we are working together and she is enjoying being the first lady and I am enjoying and loving being the governor of California.

HANNITY: Governor, it's always good to see you. Thanks for being with us again on "Hannity & Colmes," appreciate it.

SCHWARZENEGGER: Thank you very much, thank you.

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