Well that stinks. Especially with such short notice.

No, this isn't just a California thing. School districts all over the country are implementing wellness policies. Overall I think it's a positive, but some schools or individuals are going overboard in the interpretation, as in your case. But, in the short term, I think it's going to be easier to make some menu changes than to get anyone to change their interpretation.

Can you get a copy of the wellness policy and read it for yourself? Maybe with more information you could come up with an acceptable alternative and reschedule. For example, muffins don't have to be chocolate chip. Perhaps the language of the policy would allow you to serve low sugar pumpkin, zucchini, or carrot muffins? (They're not as bad as they sound, I swear! We have a wellness policy, too, so I made pumpkin muffins instead of cupcakes for my daughter's birthday treat and the kids really liked them.)

Also, it might be a good idea to find out who has final say on what's ok to serve and what's not and present the menu to that person for approval well in advance so you won't risk getting cancelled again. At our school it's the principal, so any time we want to serve food we run it by her first. Thankfully, she's very sensible in her interpretation of the policy, so we rarely get a "no", but it's best not to have any last minute surprises.