The California’s budget situation is reaching critical condition, and the state’s S-CHIP program, known as Healthy Families, is on life support. With Governor Schwarzenegger proposing to pull the plug, protesters—including 150 children currently covered by Healthy Families—have descended on the Capitol today to express their opposition to the cuts.

The demise of the popular program, which covers more than a million moderate-income children, would have dire consequences. A UCLA report released this week says that the expected massive cuts in the state work force could hike California’s unemployment rate to more than 12 percent, creating the worst job market in the state in decades. And many families will lose their employer-based health insurance along with their jobs at a time when they can least afford to buy private insurance.

The termination of the Healthy Families program would also mean the state will lose additional federal matching funds, exacerbating the damage to state services—the state’s Medicaid program, Medi-Cal, ia also under the budget knife. The legislature’s budget conference committee has opted for a $70 million cut to Healthy Families, rather than eliminating it. But such a huge cut would create waiting lists and deny coverage to an estimated 200,000 kids.