Schwarzenegger's Former Budget Director Takes on Big Money in Calif. Governor's Race

Is it possible to embrace a temporary tax increase and survive a Republican primary for governor of California?

Tom Campbell, a former congressman and state senator who served as Gov. Arnold Schwarzenegger's budget director, intends to find out.

"My hope is that we can return to pragmatic, effective, good governance," Campbell told ABC News as part of the "Candidate Corner" series. "Trust us to make the state run well and in that process recognize that compromise is needed as part of the democratic process, a small-'d' democratic process."

The temporary tax hike embraced by underdog candidate Campbell is contained in Proposition 1A, a measure on the state's May 19 ballot that would bolster the state's "rainy-day fund" and limit spending in good fiscal years while temporarily raising taxes.

Prop. 1A is being championed by the term-limited Schwarzenegger and the state's Assembly Republican leader but it has been opposed by Campbell's two Republican rivals for governor: former eBay chief Meg Whitman and state Insurance Commissioner Steve Poizner.

Poizner and Campbell appeared recently before the California Republican Party's executive committee to debate the ballot measure. The state GOP leaders sided with Poizner and voted to oppose all six measures on next month's special election ballot.

Proposition 1A is anathema to a sizable chunk of the Republican Party.

"Campbell came out for this tax increase, that's goofy," Grover Norquist, the president of Americans for Tax Reform, told ABC News.

While Campbell is not surprised that Proposition 1A has been opposed by many anti-tax activists, he believes the measure is misunderstood and that it represents a worthwhile "trade-off."

'The Trigger of Taxes'

"It's a very conservative proposition," Campbell said. "Traditional Democratic power bases in California are very much troubled by 1A because it establishes a rule that if you get more revenue than the previous 10-year average, it goes into a reserve fund. It can't be spent. Once you fill up the reserve fund, if that still comes in above the average, you've got to spend it for one time things as opposed to entitlements.

"The only reason it ran into problems with the Republican Party -- at least some members of the Republican Party -- is because of the trigger of taxes," he added. "But there, I see a real clear trade-off: it's an extension of the sales tax for one year, an extension of the income tax for two years, after which they do go back to the previous rates, automatically, no further law needed, and, in return, for which we get permanent budget reform.

"That's traditionally a Republican thing, not a Democratic thing," he continued. "The tradition on the Democratic side has been to expand the entitlement programs and, in California, that would be welfare, Medicaid and the Prop. 98 guarantee to K-14."

While Campbell is at odds with his GOP rivals on Proposition 1A, he is with them in opposing Proposition 1B, a measure that ultimately would tap into the new rainy-day fund to restore billions of dollars in school cuts.

Prop. 1A must pass in order for 1B to take effect.

"When you're in a crisis and have to cut spending, everything should be on the table," including K-12 schools, he recently told the Los Angeles Times. "All components of state government are in need: welfare recipients, folks on Medi-Cal."

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