The Cactus is in a University building, and its staffers are state employees with steady salaries, medical and dental benefits, and eventual pension rights. Consequently, it's not a matter of simply relocating to another place in town. It does pay performers and charge admission, but its context insulates it from commercial realities. I doubt too many people are clamoring for the chance to open a full time folk music club with the need to pay market rent and support themselves.
There's been one proposal floated (merely floated) about finding a home for it in the on-campus alumni center with a different university budget behind it. There are lots of concerns about that potential space, but the immediate problem is that it wouldn't be available until Fall 2011 at the earliest, and the University is determined to shut down the Cactus this summer.
I know the Cactus has a unique situation that's helped it thrive. So why kill it?