Republican Sen. Jake Corman, who represents State College, said much of the money was generated within the state, so he believes the child abuse prevention grants it is earmarked for should be distributed for "the betterment of Pennsylvanians."
Corman said he hoped lawmakers would act quickly on his proposal, as the school has already made its first $12 million payment. He also plans to ask a court to prevent any of that initial payment from being released to organizations outside Pennsylvania.
"I don't think this is going to be a hard sell, to keep the money here locally," he said.
Gov. Tom Corbett said he was supportive and accused the NCAA of overstepping its authority with what he called "harsh, unjustified and unprecedented punishment."
A university spokesman had no reaction to Corman's proposal, while the NCAA did not immediately respond to a request for comment.
At a Capitol news conference, Corman distributed a two-page draft of the bill, titled the Institution of Higher Education Consent Decree Endowment Act. It would apply to all colleges and universities that receive state support, and enter into consent decrees involving a fine of at least $10 million.
Sandusky, a former Penn State assistant football coach, was convicted this summer of 45 child sexual abuse counts and is serving a 30- to 60-year prison sentence. He maintains he is not guilty and is pursuing appeals.
The NCAA has said at least a quarter of the money will be spent in Pennsylvania, a decision that has also drawn criticism from the state's congressional delegation. An NCAA task force plans to recommend in the coming months how the first $12 million should be spent.
Last week, U.S. Rep. Charlie Dent last week said NCAA president Mark Emmert's position on the matter was "unacceptable and unsatisfactory."
Emmert, in a Dec. 12 letter to Dent, said the state could significantly increase its initial allocation "by outlining comprehensive plans to address child sexual abuse."
Penn State president Rodney Erickson agreed to the fine in July, as part of a set of penalties over the school's handling of the Sandusky scandal. The university also agreed to a four-year ban on postseason play, a loss of scholarships and to vacate more than 100 wins over 14 years. The agreement avoided the potential that the NCAA, based in Indianapolis, could shut down the football program.
The $60 million figure was tied to the football program's annual gross revenue.
The scandal toppled coach Joe Paterno and university president Graham Spanier, and led to pending criminal charges against Spanier and two of his former top deputies, vice president Gary Schultz and athletic director Tim Curley. Spanier, Schultz and Curley deny the allegations and await a preliminary hearing.
Paterno died a year ago, at age 85, from lung cancer.