CHRIS WALLACE, FOX ANCHOR: The state of North Carolina faces a deadline tomorrow to stop enforcement of its new law that people must use bathrooms of the gender on their birth certificates. The Justice Department says that law violates the federal Civil Rights Act and is threatening to cut off billions of dollars in federal funds if the state refuses to comply.
Joining me now is North Carolina Governor Pat McCrory.
And, governor, welcome to FOX NEWS SUNDAY.
GOV. PAT MCCRORY (R-NC): Thanks for having me, Chris. I appreciate it.
WALLACE: All right, well, let's start with this deadline that you face tomorrow to suspend implementation of the so-called bathroom law or to face the potential loss of billions of dollars in state funding. Governor, what are you going to do?
MCCRORY: Well, first of all, the bathroom laws (INAUDIBLE) only applies to government buildings or schools and our universities and highway rest stops. It doesn't apply to anyone in the private sector. In fact, our ruling says that the government shouldn't make bathroom laws for anyone in the private sector.
WALLACE: Understood.
MCCRORY: That's up to the private sector.
What I've asked for, I asked for Friday, was an extension. They gave the ninth largest state in the United States, the civil rights division of the Justice Department, three working days to respond to a pretty complex letter and to a pretty big threat. Well, we don't think three working days is enough to respond to such a threat from a -
WALLACE: Did they respond to your request for an extension?
MCCRORY: Yes, they said, no, unless we will give you a one week extension if the governor admits publicly that the ruling that their language regarding bathrooms does, in fact, discriminate. Well, I'm not going to publicly announce that something discriminates which is agreeing with their letter because we're really talking about a letter in which they're trying to define gender identity. And there is no clear identification or definition of gender identity. It's -
WALLACE: Well, all right, but let me - let -
MCCRORY: It's the federal government being a - a bully. It's making law. It's - and by their interpretation. And -
WALLACE: So you asked for an extension of a week.
MCCRORY: Right.
WALLACE: They said no.
MCCRORY: Right.
WALLACE: I've got a copy of the letter, too, and they say you've got to make a decision on whether or not you're going to step away from House Bill 2, this law.
MCCRORY: Right. Right.
WALLACE: By the close of business tomorrow. So what are you going to do?
MCCRORY: Well, first of all, I don't have the authority to change the law as governor of the United States. That's passed by the North - or as governor of North Carolina. That is made by the North Carolina legislature. So they've already made one unrealistic expectation. And, second, they've also sent a letter to our universities and our university by state law has to go to the board of governors, which cannot meet until Tuesday. So this unrealistic deadline by the federal government is quite amazing to the ninth largest state, but I'll make a decision within the next 24 hours on how to respond to them. I - I believe I have until 5:00 tomorrow.
WALLACE: And how are you going to decide?
MCCRORY: I'm discussing all of our legal options, all of our political options, because, frankly, there are two ways the federal government can determine this. One is, is a bathroom policy determined by the Congress and signed by the president, or a dictate from a regulatory agency in the United States federal government. And that's the way it is right now.
WALLACE: Is - is it - it is possible - I'm trying - I'm trying - obviously, I'm doing my job.
MCCRORY: Sure. Sure.
WALLACE: I'm trying to pin you down. Is the - are you willing to rule out at this point that you will disavow, and however you phrase it, in effect say, I'm walking away from this law?
MCCRORY: I'm looking at all my options. And one thing the nation has to realize, this is no longer just a North Carolina issue. This order, this letter by the Justice Department, is saying that every company in the United States of America that has over 15 employees are going to have to abide by the federal government's regulation on bathrooms. So now the federal government is going to tell almost every private sector company in the United States who can and who cannot come into their bathrooms, their restrooms, their shower facilities for their employees, and they're also telling every university in the United States of America. This is not just North Carolina. They are now telling every university that accepts federal funding that boys who may think they're a girl can go into a girls' locker room or restroom or shower facility.
WALLACE: You -
MCCRORY: And that begins, I assume, tomorrow.
WALLACE: Governor, you call this a case of Washington overreach and I want to explore that with you.
MCCRORY: Yes.
WALLACE: Would it be overreach for the Justice Department to send you a letter like this to say, you cannot have bathrooms in the state capital one for white and one for black?
MCCRORY: I don't think there's any correlation between the two and I think it's misleading.
WALLACE: But would you agree that that is within the federal government's purview?
MCCRORY: Absolutely, but we can definitely define the race of people. It's very hard to define transgender or gender - gender identity or -
WALLACE: But - but - but the point is - the reason I ask is -
MCCRORY: Why?
WALLACE: That the Justice Department says that just like whites and blacks that transgender people are a protected class.
MCCRORY: Right.
WALLACE: And that has a legal -
MCCRORY: Right.
WALLACE: That meaning, a protected class under the 1964 Civil Rights Law.
MCCRORY: That's what they say, but that's not what the federal law says. The federal law uses the term "sex" and Congress does not define "sex" as including gender identity or other terms that the Justice Department has currently used. So right now the Justice Department is making law for the federal government as opposed to enforcing law.
WALLACE: It sounds like basically you're going to challenge this in court?
MCCRORY: We're looking at all our options right now, but we also want to get feedback from the business community throughout the nation that's going to be impacted by this and all universities throughout the nation that are impacted by this.
WALLACE: OK.
MCCRORY: But we're literally talking about billions of dollars now, if it is challenged, I assume there's no way - I'm not going to risk any money for the state of North Carolina. And now even the DOT, the national - the DOT -
WALLACE: Department of Transportation.
MCCRORY: Department of Transportation here in Washington is doing press releases saying they're examining whether they can take away North Carolina's money for roads and other transportation needs over a bathroom issue.
WALLACE: But let me - let - I'm going to get to the money in a - in a second. But how many cases - how many cases have you had in North Carolina in the last year where people have been convicted of using transgender protections to commit crimes in bathrooms?
MCCRORY: This wasn't a problem. That's the point I'm making. This is the Democratic Party and the left wing of the Democratic Party -
WALLACE: But have - have there been any cases of this?
MCCRORY: Not that I'm aware of.
WALLACE: Have there been any cases in the last five years?
MCCRORY: Let - why did the Democratic Party in Houston, Texas, and - and -
WALLACE: But - but I guess the question is - forgive me, if I may, sir.
MCCRORY: No.
WALLACE: Why not just then let it go if there's - if there's not a case of transgender people going in and molesting little girls -
MCCRORY: Because there's - I haven't - I haven't used that at all. This is an issue of expectation -
WALLACE: Well, you did say a - a boy who thinks he's a girl going into a girls' bathroom.
MCCRORY: And that's where there's an expectation of privacy. When you go into a restroom or your wife goes into a restroom, you assume the only other people going into that restroom or shower facility is going to be a person of the same gender. That's been an expectation of privacy that all of us have had for years.
WALLACE: But if there's no problem, then why pass the law in the first place?
MCCRORY: Well, there can be a problem because the - the liberal Democrats are the ones pushing for bathroom laws and now President Obama and one of my successors as mayor of Charlotte wants government to have bathroom rules. I'm not interested in that. We did not start this on the right. Who started it was the - the political left in Houston, Texas, then Charlotte, North Carolina, and now, frankly, in Washington, D.C.
WALLACE: Let's talk about the issue of money because North Carolina's attorney general, Roy Cooper, who coincidentally is running against you for governor in your re-election fight in this year -
MCCRORY: Yes. Yes. Right.
WALLACE: Says you made a big mistake signing this law. Here he is.
(BEGIN VIDEO CLIP)
ROY COOPER, D-NORTH CAROLINA ATTORNEY GENERAL: Not only is this new law a national embarrassment, it will set North Carolina's economy back if we don't repeal it.
(END VIDEO CLIP)
WALLACE: Now, you're campaigning against Cooper for re-election in large part on what you call the Carolina comeback -
MCCRORY: That's right.
WALLACE: Which is the fact that there has been dramatic economic growth in Carolina for - over the last few years. But let's - let's take a look at the fallout from this law. PayPal canceled a 400 job operations center. This is since the law was passed and you signed it in March. Deutsche Bank shelved plans for facilities that would have employed 250 people. One study found the law has cost North Carolina $77 million and 750 jobs.
Governor, you say you're not going to risk money. This is - all this has happened just since March.
MCCRORY: Well, let me first say, North Carolina's had the greatest economic recovery in the United States of America, more than any other state.
WALLACE: But this isn't good.
MCCRORY: But since I've been governor - let me finish the sentence, Chris.
WALLACE: OK.
MCCRORY: And then, second, I need to say PayPal, for example, is kind of selective hypocrisy and selective outrage. This is the same PayPal company that did business in Sudan, did business in Iran, did business in Saudi Arabia and they're lecturing North Carolina because the majority of North Carolinians, I believe, think a man who's a man ought to use the restroom that is on the door. And same thing applies to women. And this is especially true in our schools, in our junior highs, in our high schools. This is a basic change of norms that we've used for decades throughout the United States of America and the Obama administration is now trying to change that norm. Again, not just in North Carolina, but they're ordering this to every company in the United States of America starting tomorrow, I assume, or Tuesday, and also making this an order for every university in the United States of America.
WALLACE: Governor McCrory, thank you. Thanks for flying here today and talking with us.
MCCRORY: Thank you very much.
WALLACE: And, of course, we will be looking forward to finding out what you decide and what you say by the close of business tomorrow.
MCCRORY: Thank you very much.
WALLACE: The - the federal deadline. Thank you, sir.
MCCRORY: Thank you. Thank you very much. Thank you.
WALLACE: Good to talk with you.
MCCRORY: Thank you.
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