(CBS) — As several hundred protesters chanted outside an Elgin restaurant Friday, Gov. Bruce Rauner told supporters inside that he is ready to do battle with Illinois’ public employee unions.

Rauner said he is not anti-union and is not demanding that county and local governments join him, but stressed communities that go along will be able to compete with Wisconsin, Iowa, Indiana, Texas, Tennessee and other states that forbid union shops.

He said if they don’t want to be competitive, that’s their business.

“We don’t have to go right-to-work as a state to compete. I don’t say that,” he said.  “Federal labor law allows counties and municipalities to decide this issue.  I want you to be able to decide.  If you want to be able to complete with Indiana, Texas and Tennessee, you should be able to decide and you should be able to complete.  If you don’t want to, fine.  Leave it.”

Rauner said he was not surprised that state public employee unions filed suit seeking to overturn his executive order that allows public employees who don’t want to belong to unions to opt out without having to make so-called “fair share” payments to unions.

He said he fully expects the legal battle to go all the way to the U.S. Supreme Court.

Also Friday, the governor answered Chicago Mayor Rahm Emanuel and suburban mayors who have written or told him directly that his proposed 50 percent cuts in state aid won’t work and will create chaos that doing things his way will prevent that.

“When they see what they can control in their collective bargaining, what they  can control in their pensions, what they can control on who has to join a union or not, their costs will come down,” he said.  “We can lower property taxes and they won’t be needing so much general support from the state.”

He said he would knock out so-called “prevailing wage” agreements with trade unions, which he estimated alone would save “hundreds of millions of dollars,” and said increases in state aid to education would decrease the reliance on locally generated property taxes.

Outside the restaurant, several hundred people picketed behind police barricades, calling Rauner a union buster and his methods illegal.

Following the appearance, Rauner met privately with a group of suburban mayors to outline his proposals in more depth.