There is no longer any doubt about one thing in California politics: Gov. Schwarzenegger is willing to die on the cross of budget reform.

My conversations with people inside and outside the administration, and a review of news leaks in advance of his revised budget proposal this afternoon, make it clear that he is doubling down on budget reform. For a man with a reputation for twisting with political winds, he is doing the opposite here. He is so determined to pursue his budget reform (a spending-side proposal based on a rainy day fund and more power for governors to make mid-year cuts) that he is risking what’s left of his governorship.

One piece of the approach is undeniably smart. As the Sacramento Bee reports, he’s pulled back from his proposal for including education in his cuts and is proposing to meet the Prop 98 minimum on education. Schwarzenegger’s cuts might have been more fiscally responsible–but they were politically poisonous to his project of budget reform. By dropping the unpopular education cuts, he is making a strategic move that shows the depth of his commitment to budget reform — or bust.

The "bust" in this case is the highly unpopular and promise-breaking sales tax increase he’s offering as a back-up to his budget reform plans. One note here: The LA Times today reports that the governor is going to ask the voters to aprpove a privatization of the lottery. If they don’t, his back-up plan will be a one-cent sales tax increase. Two trusted sources tell me, however, that the gamble is bigger than just the lottery. Schwarzenegger sees more than just the lottery on the ballot; he wants his budget reform proposal there, and the one-cent sales tax is the back-up to the whole package.

The risk here is that by putting things on the ballot, he could effectively extend a difficult, contentious, popularity-sapping budget season all the way into November. His popularity is already falling; if things don’t go well, he could be in George W. Bush-Richard Nixon territory by fall. And if his reform loses and he gets a tax, he’ll likely lose what’s left of his Republican base. With this approach, Schwarzenegger is giving it to California voters straight: he literally thinks there’s nothing more important (even his own political career) than changing the way the state budget is managed. It’s classic Arnold: high-risk, big, and structured in a way to produce a lot of attention. Whatever happens, it makes a hell of a movie: your governor is jumping off a cliff without a parachute.