The timing is suspect because the guards are in the middle of contract talks with the state.
Critics wonder if the money buys the prison guards any favors at the Capitol.
"We think the case is very strong that something stinks on the other side, and voters need to take a close look," said Derek Cressman, Common Cause.
Common Cause suspects the money will be used to fight Proposition 11, the measure that re-draws political districts.
Many Prop 11 opponents say the initiative would end up creating more conservative, anti-union, legislative districts.
The prison guards union simply says the initiative is flawed and wants to help Senator Perata defeat it.
"We are certainly trying to achieve collective bargaining in California. We are trying to protect the interest of our members. But there is absolutely no tie between this contribution and anything else we're doing on the legislative front," said Lance Corcoran, California Correctional Peace Officers Association.
"Filing this thing is the cheapest form of political theater," said State Senator President Don Perata, (D-Oakland).
Among the bills lawmakers are considering during the waning days of the 2008 legislative year, none of them address the prison guards' contract.
Governor Arnold Schwarzenegger (R-California) criticized the donation.
"This money exchange is terrible for the people of California," said Governor Schwarzenegger.
Schwarzenegger is a strong supporter of Prop 11. He even transferred more than $2 million of his campaign fund to help promote it.
The governor's campaign fund has received record donations.
"He has more special interest money than any other Governor has ever had. And now he's pointing the finger at us saying we're not playing fair?" said Corcoran.
The Fair Political Practices Commission has two weeks to decide whether it will investigate this money.
Common Cause wants the donation to be returned to the prison guards.