State and Local Fiscal Assistance Act - Repeals the provision of the State and Local Fiscal Assistance Act of 1972 which limits units of local government to use funds received under such Act only for priority expenditures. Authorizes the appropriation to the State and Local Government Fiscal Assistance Trust Fund of $6,650,000,000 for fiscal year 1977, and of $1,7000,000,000 for the period beginning July 1, 1977, and ending September 30, 1977. Authorizes appropriations based upon the Federal adjusted gross income to such Fund for the fiscal years beginning after September 30, 1977. Defines the term Federal adjusted gross income for purposes of such Act. Removes the penalty payment provision under the Act which requires units of local governments to pay over to the Secretary of the Treasury amounts equal to 110 percent of amounts expended out of their trust funds in violation of the provisions of such Act. Extends entitlement periods under such Act to the period beginning July 1, 1977, and ending September 30, 1977, and the one-year periods beginning October 1, 1977 and all subsequent years.