Gov. Arnold Schwarzenegger endorsed a California constitutional convention – last used in 1878 – as a way to fix what he described Thursday as the state's "dysfunctional" system.

Speaking at the Commonwealth Club of California, the Republican governor took dead aim at potential foes of budget-related measures he wants voters to pass May 19 while embracing several political changes not on the ballot.

Schwarzenegger said legislative term limits should be extended so state lawmakers have time to build sufficient experience. He said the initiative process should be changed to prevent well-heeled groups from pitching bond measures the state can't afford.

And he supported a state constitutional convention to overhaul California's government as a whole.

"I think that eventually the state of California has to look at a constitutional convention, to really look at the whole thing, the way government works in California," Schwarzenegger said. "Because there are many aspects of government in California that are dysfunctional."

The idea has gained momentum in recent months, led by the Bay Area Council, a group of business leaders.

Convening a new constitutional convention requires two-thirds legislative approval, a major barrier, advocates said. To skip that step, the Bay Area Council wants to place two initiatives on the November 2010 ballot – one allowing voters to call a convention, as well as a proposal authorizing an immediate convention.

Bay Area Council President and CEO Jim Wunderman said the convention could examine how the state collects and distributes money, as well as its structural organization.

"I hope (Schwarzenegger) would see this as an opportunity to do what he was elected to do, to leave California in a position to achieve," he said. "It doesn't seem like we're in a position to do that now."

Schwarzenegger focused his speech Thursday on explaining why voters should back Proposition 1A, which would limit spending in good years but also extend a series of temporary tax increases. So far, little coordinated opposition has formed, but labor unions are discussing whether to mount an attack.

"And the very interests, the far left and the far right, that prefer dysfunction over change have already launched a campaign to confuse the people and to defeat the reform," Schwarzenegger told the Commonwealth Club in San Francisco. "But this time they are not going to be successful."

After signing an unpopular budget, Schwarzenegger rebuked his critics. He accused fiscal conservatives who advocated for spending cuts alone of being "guilty of political cynicism at its worst." Of those who advocated for only tax increases, Schwarzenegger said, "Their grasp of economics must come from living on a hippie commune."

Proposition 1A would require the state to limit spending based on a 10-year revenue trend and shift excess money to a "rainy-day" fund in good years. But it also would extend a new 1-cent sales tax increase and other tax hikes on income and vehicles.

Schwarzenegger said his May ballot effort would succeed because it had diverse support, comparable to the coalition behind last year's redistricting change. But one former ally undercut that argument. The League of Women Voters of California, a nonpartisan group that helped Schwarzenegger win the redistricting fight, said it believes Proposition 1A would tie the hands of future lawmakers.

"Most of its provisions will not take effect for two years – two years that we should spend hammering out real solutions to our budget and fiscal challenges." said Janis Hirohama, president of the League of Women Voters.

So far, only one Proposition 1A campaign committee has emerged – a coalition of proponents that Schwarzenegger has funded with $80,000 out of his political war chest.

After his speech, the governor flew to Aspen, Colo., to raise money to pass the ballot measures, said spokeswoman Julie Soderlund.

Opponents have been slow to coordinate a political committee, largely because labor unions are still determining how to proceed. Political strategists believe unions are the only groups with enough money and motivation to fight Proposition 1A at the ballot.

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.