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Sources close to South Carolina’s top GOP politicians tell FITS that a compromise is in the works that would permit over $700 million in federal bureaucratic bailout (a.k.a. “stimulus”) funding to go toward non-recurring expenses – and that Gov. Mark Sanford is preparing to reverse his previous position and jump on board with the deal.

Of course, the rumors of a compromise agreement were quickly squelched by a top Senate aide, who told FITS on condition of anonymity that “we have no intention of letting (Sanford) off the hook that easily.”

“The governor is bleeding right now,” the aide said. “… and he knows it.”

Still, one deal allegedly proposed by Senate staff would have allocated $350 million of the controversial funds toward debt repayment with the remaining $350 million going toward non-recurring capital expenses.

Sanford’s office didn’t immediately return calls for comment on the deal, and sources on the governor’s staff are sending mixed messages as to whether or not Sanford plans to stick to his previous position of withholding all of this $700 million unless it goes toward debt repayment.

One aide to the governor said that Sanford would accept “nothing less” than 100% debt repayment while another indicated that there was “increasing openness” within the administration to consider alternative agreements.

Whoa … talk about a paradigm shift.

The governor’s eventual decision could boil down to whether his South Carolina or DC advisors hold sway.

Sanford Chief-of-Staff Scott English is reportedly counseling the governor to accept a deal that would permit at least some of the money to go toward non-recurring expenses – such as school buses, roads and bridges – while the governor’s D.C. political consultant Jon Lerner is advocating debt repayment because it better positions Sanford for a prospective 2012 presidential bid.

Whatever final decision comes out of the governor’s office, it could all be for naught as several State Senators are banding together to “stick (Sanford) with the check,” as one put it.

“I fear the window for statesmanship has closed,” one Senate advisor told FITS.

Another State Senator told FITS that the votes “simply aren’t there” for a fifty-fifty split on debt repayment, and that a majority of Senators seemed inclined to “let Sanford eat it.”

Last week, Sanford petitioned the federal government to release several billion in bailout funds to South Carolina, while steadfastly insisting that the $700 million under his direct control would not go to fund recurring expenses.

At a press conference last week, the governor said pointedly that state agencies should not count on getting any of that particular pot of money.

Still, the fact that Sanford signed the certification form at all is “the beginning of the end” of his resistance, according to one source who is following the 2012 maneuvering from Arlington, Virginia.

“We’re in the realm of semantics now,” said this 2012 observer. “He should have let the deadline pass last week and been done with it. Now it appears this $700 million will be spent in South Carolina on something.”