Gov. Schwarzenegger’s state of the state speech was many things – funny, frank and a thorough summing up of California’s major challenges, few of which will be addressed in his last year in office.

But this valedictory may be best remembered for a terrific metaphor at its heart: the Pig and the Pony.

Schwarzenegger, in describing the “menagerie” of people and pets at his home (so many that I wondered if animal control should be spending more time in Brentwood), talked about how his family’s miniature pony and potbellied pig (whose names, I’m told, are Whiskey and Bacon) work together to break into and eat the dog’s food.

Here’s how he told the story: “Now, the dog’s food, which we keep in a canister with a screw-on lid, sits on the top of the dog’s kennel. The pony has learned to knock the canister off the top of the kennel, and then he and the pig wedge it into the corner. There’s this ridge on the lid of the canister, and the pig with his snout pushes this ridge around and around until it loosens, and then they roll the canister around on the floor until the food spills out. I don’t know how they ever figured all of that out….But it is the greatest example of teamwork. I love it.”

The rest of the speech made clear that there’s a canister of dog food that Schwarzenegger wants to crack open:

It’s called the federal treasury.

Beneath the jokes, Schwarzenegger’s address was a tough-minded declaration of war. The enemy? The federal government and other states, who are denying California a fair share of federal revenues. The governor resolved to get more from the feds—and he was smart to do so, for three reasons.

1. His cause is just. California is a donor state and is in trouble. We’ve been effectively subsidizing other states (and he mentioned several specific examples, including Sarah Palin’s Alaska)

2. For an unpopular lame duck like Schwarzenegger, demanding more money from the feds is one of the few policies he should be able to unite politicians of both parties behind.

3. As a Republican who has been supportive of President Obama’s policies on health care and climate change, Schwarzenegger is uniquely positioned to win this fight.

How does Schwarzenegger propose to gain leverage? By sticking his own snout into the federal health care legislation.

This answer was the real news – potentially national news – in the speech. Despite the governor’s strong support for health care reform, he said he would oppose it unless California got a much better fiscal deal from the feds. “Health care reform, which started as noble and needed legislation, has become a trough of bribes, deals and loopholes,” he said. Specifically, the governor said Californians should oppose the bill unless the state gets the kind of blank-check Medicaid deal that Nebraska Sen. Ben Nelson negotiated for his own state.

Trying to make federal health legislation a hostage, given its precariousness, is a good, if risky idea. So as long as he doesn’t anger Congress and the administration too much, Schwarzenegger could come away with billions for the state budget.

Here’s a handful of other notes I made during the speech.
-STEPPING ON HIMSELF: In some ways, it’s too bad for Schwarzenegger that he had to give the state of the state speech today. The address, which naturally focuses on California’s problems, stepped on some very good news for the governor: the legislative advance of important education legislation that allows California to compete for federal “Race to the Top” funds. This is an important political victory for the governor over his tormentors in the teachers’ unions.

-ECONOMIC VOID. The governor’s four economic proposals ($500 million for worker training, streamlining permitting for construction projects that already have environmental reporters, a homebuyer tax credit, and exempting green manufacturing equipment from the sales tax) were, despite their merits, underwhelming given the scope of the state’s economic problems.

A criticism of the governor here: he has never been able to project the same passion for sparking economic revival that he demonstrates when discussing green technology and environmental regulation. The scope of his ambitions on the environment surpass those on the economy. It’s time to think bigger in this area.

-BEST GIMMICK. Schwarzenegger proposed a constitutional amendment that would require the state to spend more on higher education than it does on prisons. In doing so, he made an important point about the growth of prison spending and the decline in spending on higher ed. But I’m not sure about the rubber-meets-the road test. How would you find the money to make it happen, or enforce it?

-STILL THE MASTER… of the sound bite. Among his better lines:

“The budget crisis is our Katrina. We knew it was coming. We’ve known it for years. And yet Sacramento would not reinforce the economic levees.”

“What do they mean too hard? If I had hesitated to attempt something because it was too hard, I’d still be yodeling in Austria.”

“What I ask you to remember is that the current tax and budget system is cruel. It is cruel because it is forcing us to make a Sophie’s choice among our obligations. Which child do we cut? The poor one? The sick one? The uneducated one? The one with special needs? That is cruel.”

-LEGISLATIVE REACTION: The applause in the chamber was tepid, even at times when lawmakers should applaud loudly. That reaction tells the story of his governorship. Schwarzenegger was making the case for meeting difficult challenges, for necessary compromises. Many of the policies he outlined are exactly what the California’s voters want. But the ideologues that dominate the legislature have refused, over and over, to go along, even (and especially) when the governor is right.