Swampland calls this the Underplayed Story of the Day, and I have to agree: California's legislature has killed the ambitious $14.9B health care reform plan that would have created a pretty universal system in the state.
If memory serves, Tennessee's far narrower CHIP program fell victim to the last recession, so it isn't as though this kind of thing is unexpected when the economy tanks. I won't even pretend to understand California's current budget crises, but I can guess that the broader economic woes in the country offer legislators little hope of money problems magically fixing themselves.
I remember welcoming this plan when it was introduced largely because it appeared to be backed by a broad coalition of groups representing health care, businesses, and people. That approach, even though this plan failed, will be required for any substantive change at the state or national level, and I do have to wonder whether this program would have survived were the economy not in tailspin mode.