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In his final State of the State speech, 62-year-old Arnold Schwarzenegger outlined what he called his "Sophie's Choice"—where to cut in a state which has already seen tens of billions in spending cuts.

"We face additional cuts," the Governor says, "We have no choice." On the other hand, he also said, "While we still have a long way to go, the worst is over for California's economy."

The Governor delivered a series of proposals—$500 million to retrain workers and create jobs, no cuts to education, reforming the tax code, and a constitutional amendment to stop spending more on prisons than higher education, (suggesting privatizing prisons could save the state billions)—but he managed to unite the legislature on one issue: anger over the federal government's perceived short shrift to the nation's most populous state.

Gov. Schwarzenegger says for every dollar California sends to Washington, it gets 78 cents back, while Texas gets 94 cents, Pennsylvania $1.07, Alaska "with all its oil" receives $1.84, and New Mexico $2.03. "We are not looking for a federal bailout, we just want federal fairness."

But the biggest reaction came from his words about the new national healthcare plan, which will "pile billions more onto California." The Governor says he supports healthcare reform, but the current bill "has become a trough of bribes, deals and loopholes. You've heard of the bridge to nowhere. This is healthcare to nowhere." As the gathered politicians applauded, he said, "California's congressional delegation should either vote against this bill that is a disaster for California, or get in there and fight for the same sweetheart deal Senator Nelson of Nebraska got for the Cornhusker State. He got the corn, we got the husk." On this, even Attorney General and presumptive gubernatorial candidate Jerry Brown told me he agrees with Schwarzenegger.

Finally, the Governor told lawmakers that much of what needs to be done—especially reforming the tax code—will take boldness. "Bold is what we do in California," he said. "If I had hesitated to attempt something because it was too hard, I'd still be yodeling in Austria."

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