Gov. Code, § 16366.8

For those programs for which the state does not assume full administrative responsibility under the block grant consolidations reflected in the federal Omnibus Budget Reconciliation Act of 1981, but for which state agencies have continued administrative and funding responsibility, as reflected in the Budget Act of 1981, the following criteria shall be used in allocating any reduced levels of federal funds:

(a) The funds shall be utilized for the same purposes as discontinued federal grants.

(b) The funds shall serve the special populations which meet the criteria of need required by federal categorical grant legislation and regulation.

(c) Funds shall be administered by those state agencies currently administering the funds.

(d) To the extent that federal funds are allocated to counties on the basis of county plan submissions to appropriate state agencies, the county plans shall be amended to reflect reduced federal funding. The county shall hold at least one public hearing regarding the proposed changes to the county plans affected. With respect to any plans which are required to be approved by the state, the amended plans shall be approved by the appropriate state agencies and shall comply with the criteria set forth in this section. The approval shall be conducted and completed within 30 days to prevent interruptions in services.

(e) The amount expended in the 1981–82 state fiscal year by the state and by service providers for program administration of all federal categorical and block grant programs shall not exceed the percentage levels of administrative costs approved by the Legislature for departments and providers as of July 1, 1981, and reflected in each service provider grant in effect on that date.

If a state department finds that compliance with the provisions of this section disproportionately burdens certain programs or categories of clients, the department may withhold up to 5 percent of the total amount awarded to the department for each such categorical grant in order to equalize service levels.