Gov. Code, § 16260

(a) Except as provided in subdivision (x), out of the amount appropriated by Section 16100, there shall be allocated for counties and cities and counties, for the 1978–79 fiscal year only four hundred thirty-six million dollars ($436,000,000) to be distributed as provided in subdivisions (b), (c), (d), and (e).

(b) (1) For each county and city and county, the amount of property taxes collected, plus the amount of homeowners’ and business inventory exemption reimbursements, for the 1977–78 fiscal year shall be computed by the Controller.

(2) From the amount determined pursuant to paragraph (1), there shall be subtracted the amount determined for each county and city and county in 1978–79 pursuant to Section 26912.1.

(3) From the remainder determined pursuant to paragraph (2), there shall be subtracted the dollar amount of a county’s obligation in 1978–79 relieved by Sections 33 and 34 of Chapter 292 of the Statutes of 1978.

(4) The amount determined pursuant to paragraph (3) shall be aggregated for counties and cities and counties in the state.

(5) The Controller shall then determine what the percentage of the amount computed for each county and city and county pursuant to paragraph (3) is of the total statewide amount computed pursuant to paragraph (4).

(6) The percentage determined pursuant to paragraph (5) shall be applied to the amount described in subdivision (a), modified by subdivision (x) if applicable, to determine the dollar share of the surplus allocation for each county and city and county.

(c) From each county’s or city and county’s surplus allocation, there shall be subtracted an amount equal to one-third of the amount by which the county’s or city and county’s general fund reserve balance on July 1, 1978, as defined in subdivision (e), exceeds 5 percent of the county’s or city and county’s total 1977–78 revenues.

(d) The remainder determined in subdivision (b) minus the amount determined in subdivision (c), if positive, shall be distributed to each county and city and county by the Controller in accordance with the following schedule:

Thirty-three percent—on August 31, 1978, or a subsequent date if the information needed by the Controller is not available by this date.

Thirty-three percent—on December 10, 1978.

Thirty-four percent—on May 10, 1979.

(e) As used in this section, “general fund reserves” includes the fund balance available as of June 30, 1978, of the general fund. “General fund reserves” shall not include:

(1) Noncash assets such as stores, inventory, property and buildings, or other investments purchased prior to June 6, 1978.

(2) Any amounts for self-insurance, for contractual obligations, or for reserves established by law or a governing board policy adopted prior to June 6, 1978.

(3) Any amounts restricted by law or court order.

(4) Any amounts committed to a capital outlay project approved prior to June 6, 1978, by the board of supervisors.

(f) For the purpose of this section, the amount of property tax collections pursuant to existing law for the purpose of making annual payments for the interest and principal on outstanding general obligation bonds or other indebtedness approved by the voters prior to July 1, 1978, shall be excluded from all calculations.

(g) Funds distributed pursuant to this section shall be given first for police, sheriff, and fire protection programs in order not to jeopardize the health and safety of the community. The legislative body shall ensure that the level of police, sheriff, and fire protection programs actually provided in the 1977–78 fiscal year shall be continued in 1978–79.

Nothing in this section shall prevent the legislative body from reviewing and establishing its police, sheriff, and fire protection program in the 1978–79 fiscal year in a manner which will make such program more efficient and effective.

Any determination by the legislative body implementing this section is hereby declared to be a legislative act.

(h) The Controller shall estimate the amounts required to be determined pursuant to paragraph (3) of subdivision (b).

The Controller shall make any necessary reconciliation no later than August 30, 1979.

(x) The amount allocated in subdivision (a) shall be reduced by an amount equal to the county share of any cost-of-living increase in aid payments under the Aid to Families With Dependent Children program, as provided in Section 35 of Chapter 292 of the Statutes of 1978.