Governor Terry McAuliffe still thinks he can expand Medicaid, despite signing a state budget that essentially prevents him from accepting the funds to do so. It looks like the strategy he's following is to barrel ahead and take the federal money. The GOP will definitely challenge him in court, but if he can get the program started, court challenges may come too late, or at least make it seem like the GOP are being obstructionist (or more obstructionist than they are now).
The fight will start with McAuliffe's line-item vetoes of some provisions in the budget. Brian Schoeneman at Bearing Drift has a good overview of why that's probably not constitutional. But court challenges are tricky; you have to find a judge willing to stop the Governor from doing what he wants to do, and then the Governor has to obey. The court battle will also be a political battle, as each side tries to justify their actions in court and to the public.
McAuliffe may be trying to get what he wants by ignoring the constitutional restrictions on his powers. But executive leaders have a long history of doing exactly that. Want a model? Try Honest Abe.