The university may have to rely on a bank loan for funding while negotiations continue in Harrisburg to determine state appropriations to Penn State.

"We depend on the state supplying part of our budget and with that money not being delivered, we still have expenses," university spokesman Bill Mahon said. "We still have to pay the faculty for teaching your classes. We still have to pay the electric bill in the classroom."

The university can afford to continue operating without a loan as tuition money comes in, but officials have arranged for a line of credit at three local banks if a loan becomes necessary, Mahon said.

"Penn State relies on both the state appropriation and tuition money," Mahon said. "If we're missing part of that and we want to remain open, at some point we will have to look at a loan covering us."

The state House recently approved an appropriations bill cutting university funding by 5 percent to $306.5 million. The bill has not been approved by two-thirds of the state Senate yet, so Penn State's appropriation is in limbo, said state Sen. Robert Thompson, R-Chester, the Senate appropriations chair.

"There is not much we can do until there is a change of heart with the governor and the Democrat senators," Thompson said. "The governor is holding the state-related universities hostage until he gets his overall budget and spending plan through, which includes his tax increase proposal."

In March, Gov. Ed Rendell line used a line-item veto to strike the entire education subsidy for $4.1 billion, forcing the General Assembly to negotiate a budget, spokesman Tom Hickey said.

The governor "hated" the entire budget package and proposed a plan for serious education reform, property tax relief and an economic stimulus package, Hickey said. The plans are currently being discussed.

The governor believes if everyone works hard when the legislature returns on Sept. 9, a final budget package could be negotiated within a week or two of that date, Hickey said.

"We can't continue to find one-time fixes in order to balance the budget," Hickey said. "We need to grow the state's economy and the governor proposed a plan that will do that."

Thompson said there seems to be no willingness to compromise.

"[The governor] said he is not willing to sign one piece of legislation until everything is taken care of," Thompson said. "It's a very awkward position that the general assembly and commonwealth is in."

Julie Richards, spokeswoman for Rep. David Argall, R-Schuylkill, the House appropriations chair, said there are a number of unresolved budget issues that need to be agreed on before the university will receive funding.

"The governor is continuing to insist on having all of his programs funded," she said.

Thompson said the governor should treat these issues separately.

"We could certainly take care of our duties to our colleges without increasing taxes, but [the governor] is lumping things into one package, which we don't think is the proper way of doing things," Thompson said.

University spokesman Tysen Kendig said he is confident the issue will be wrapped up as soon as possible, but Thompson is skeptical.

"We just hope history doesn't repeat itself. There was one year when the Penn State appropriations were not determined until December," Thompson said.

"Right now, there is nothing to say it won't go that late."