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The funding isn't for campaigning, precisely.
Political parties in Canada are prohibited from accepting donations from any corporation exceeding $1000 (it was $5000, but Harper reduced it in what, in retrospect, may have been a precursor to this). In order to make up for this and in recognition of the fact that running a political party takes money, each party receives a subsidy of about $2 for every vote they receive. In theory, this means that the public funding received by the parties is in direct proportion to their public support.
Harper now wants to eliminate the subsidies. However, with the exception of his own Conservative party, every party in the House receives the majority of their funds from public financing rather than private donations. That's why this is a blatant and transparently partisan move; it's designed to rob the other parties of funding so that they can't mount an effective opposition.
There are other issues with the proposed budget that are rather dubious, but that is certainly the big ticket item.
Harper is crying foul now like a stuck pig. He realizes the magnitude of his mistake, I think, but doesn't plan on going quietly. He's actually seeking to suspend Parliament now in order to prevent this; the problem is that strictly speaking the power to prorogue Parliament belongs to the Governor General, and he can only suggest it. Historically, the Governor General has followed the Prime Minister's advice, but in this situation Ms. Jean has several options available to her and may choose not to do so.
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I wake up in the morning more tired than before I slept
I get through cryin' and I'm sadder than before I wept
I get through thinkin' now, and the thoughts have left my head
I get through speakin' and I can't remember, not a word that I said
- Ben Harper, Show Me A Little Shame
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