Responding to questions from O'Reilly, Trump said California's consideration of legislation to create a statewide sanctuary for people living in the country illegally is "ridiculous."
Trump, who opposes sanctuary cities that refuse to cooperate with federal immigration authorities, said the federal government "gives tremendous amounts of money to California."
O'Reilly asked if defunding is Trump's "weapon of choice," and the president responded: "I don't want to defund anybody. I want to give them the money they need to properly operate as a city or a state. If they're going to have sanctuary cities, we may have to do that. Certainly that would be a weapon."
California Senate President Pro Tem Kevin de Leon said state residents contribute more to federal coffers than their state gets in return, and any sanctions against California would ripple nationwide.
"President Trump's threat to weaponize federal funding is not only unconstitutional but emblematic of the cruelty he seeks to impose on our most vulnerable communities," de Leon said.
Rendon, de Leon and other Democratic leaders in California have fiercely criticized Trump and vowed to fight his policies through the Legislature and in court. The Legislature has hired Eric Holder, the U.S. attorney general under President Barack Obama, to advise members on a legal strategy.
California's nonpartisan legislative analyst reported last month that federal expenditures in the state amount to $368 billion a year, most of it to provide health care for people with low incomes.
Trump's defunding suggestion wasn't his first threat to use the power of the federal purse as leverage.
He also signed an executive order threatening to cut off some federal grants for sanctuary cities. Last week, in response to a violent protest on the UC Berkeley campus, he tweeted: "If U.C. Berkeley does not allow free speech and practices violence on innocent people with a different point of view — NO FEDERAL FUNDS?"
