Details of the negotiations were unclear Monday, but the talks seemed designed to stave off a court battle. Such a settlement could also temper criticism from Penn State alumni and supporters of Paterno, who compiled more wins than any other Division I football coach, but was stripped of a more than a quarter of them after Sandusky, a longtime assistant, was exposed as a serial child sex abuser.
Word of the talks emerged as two state officials - Treasurer Robert McCord and Senate Majority Leader Jake Corman (R., Centre) - await a trial on their lawsuit challenging the validity of the 2012 consent decree between the NCAA and Penn State.
In a statement Monday, Corman said he had not agreed to any settlement or proposed resolution and was preparing for trial next month in Commonwealth Court. "While I am open to conversations on a possible resolution, to be sure, any settlement will be judged upon what is best for the commonwealth," Corman said.
McCord's office issued a statement saying he intends to honor the confidentiality of settlement discussions. "But from the beginning, we have always supported a settlement that brings about an equitable resolution," said his spokesman, Gary Tuma.
Sources say the terms being discussed include a provision under which Penn State would acknowledge that the NCAA had the right to impose the sanctions.
An NCAA spokesperson declined to comment Monday.
In the 21/2 years since the punishment was announced, an NCAA monitor consistently has praised the university for reforms, including its overhaul of board operations and adding ethics and athletic integrity officers. In recognition of the progress, the NCAA previously lifted a ban on postseason football play, paving the way for the Nittany Lions to play in the Pinstripe Bowl last month. The league also restored football scholarships.
But the decision to vacate Paterno's wins continues to be a thorny issue in the Penn State community.
His teams in State College compiled 409 wins over a half-century, until he was fired by the board of trustees days after Sandusky, his longtime top defensive assistant, was charged with sexually abusing boys. Paterno died weeks later at age 85.
After an internal investigation concluded that he and other administrators missed or ignored signs of Sandusky's crimes, the NCAA vacated 111 of his wins, dating to 1998, the year investigators said Paterno might first have had reason to suspect Sandusky. Sandusky left the Penn State staff in 1999.
That investigation - by former FBI Director Louis Freeh - and the sanctions have roiled the university leadership, sparked numerous lawsuits, and fueled change on the board of trustees.
Gov. Corbett late last year said the trustees, of whom he is one, "probably" should not have fired Paterno. And Penn State president Eric Barron gave critics more hope when he said he would review the Freeh report's findings.
What the trustees will do - or their role in the settlement talks - was unclear Monday.
Two of the board members elected by Paterno-supporting alumni said Monday they had learned of settlement talks with the NCAA but were not privy to the details. The trustees, Anthony P. Lubrano and Albert Lord, sent a letter to the board's chairman, Keith Masser, urging him to "immediately" share the terms of any settlement proposal with all the trustees.
Masser called Lubrano's and Lord's "suppositions" incorrect. He said he had no proposal to bring before the board, which is scheduled to meet in State College this week.
The board's legal subcommittee deals with such matters, he said, and "when it is appropriate to bring a matter to the full board for its information or action, I trust that the legal subcommittee will do so."
Masser also said it would "very damaging to the university to publicly discuss the possible terms of settlement of any litigation under discussion." He did not elaborate.
History of Penn State Sanctions
Oct. 29: Penn State defeats Illinois, 10-7, giving Joe Paterno his 409th career win, passing Eddie Robinson to become the all-time winningest head coach in Division I college football. It would be the last game in Paterno's coaching career.
Nov. 4: Former Penn State assistant coach Jerry Sandusky is charged with 40 counts of child sexual abuse, and two other Penn State officials - athletic director Tim Curley and senior vice president Gary Schultz - are charged with perjury. Paterno is not charged.
Nov. 9: Penn State's board of trustees fires Paterno and university president Graham B. Spanier.
Jan. 22: Paterno dies of lung cancer.
July 12: An internal report conducted by former FBI Director Louis Freeh concludes that Spanier and other top Penn State administrators conspired for more than a decade to keep quiet sex-abuse allegations against Sandusky.
July 23: The NCAA announces sanctions against Penn State that include a ban on postseason football through the 2015 season, a reduction in scholarships from 85 to 65 for the 2014 through 2017 seasons, a $60 million fine, and the striking of 111 wins from 1998 through 2011 from the record books.
Jan. 4: State Sen. Jake Corman (R., Centre) files a lawsuit against the NCAA in state court, seeking to keep all proceeds from the $60 million fine for use on child-protection programs within Pennsylvania.
Feb. 10: A report sponsored by the Paterno family says the Freeh report was "full of inaccuracies" that resulted in "a rush to injustice."
Sept. 24: Acting on a compliance report by former U.S. Sen. George Mitchell, the NCAA announces a modification of Penn State's scholarship reductions, increasing the team's scholarship total from 65 to 75 in 2014, 80 in 2015, and the NCAA maximum of 85 in 2016.
Sept. 8: The NCAA, based on Mitchell's second report, restores Penn State's bowl eligibility, effective that season, and restores the full complement of scholarships beginning in the next season.
Nov. 5: The NCAA releases internal e-mails written in 2012 that show it was unsure about its authority to impose sanctions, but was willing to gamble that it could bluff Penn State administrators into accepting them.
Dec. 27: In its return to bowl-game action, Penn State rallies to defeat Boston College, 31-30, in the Pinstripe Bowl, its first postseason win in five seasons.
Monday: The NCAA, state officials, and Penn State officials are reportedly in talks to restore Paterno's 111 vacated wins and to leave the $60 million fine for use within the state and university on child-protection programs.
Inquirer staff writer Amy Worden contributed to this article.