The great drought of California is a surprisingly easy problem to solve. Price!
Since the drought, the price of water for farmers went up 10 times to over $1000 per acre-foot (that’s one foot deep of water to cover an acre of land, or 1.2 million gallons). The government forecasted that the price of fresh fruits and dairy products may go up about 4 to 6 percent. What it really means is the cost of water is quite insignificant compared to the other costs in producing fresh fruits and dairy products.
An average family in Los Angeles pays about $30 in water bill, compared to $75 in Seattle, an area with no water shortage what-so-ever. Why would someone in LA not turn on the sprinklers to water his lawn? The lawn costs far more than the water.
We have a rare and precious commodity whose price is just about zero. It makes no sense.
There are many argument against raising water prices. None of them apply to the needs to irrigate plants, flushing toilets, watering lawns, and washing cars. Yes, higher water prices will damage some farmers who depended on cheap water. This is not different from higher prices for other commodities that will damage other industries.
A higher water price can facilitate better recycling plants, desalination projects, transportation of water from far away places. It will encourage conservation and force farmers to become more efficient.
Of course, there are three other solutions that are cheaper: taking water from Arizona and Nevada, praying, and do nothing. After all, winter is coming.
Edit:
Clearly, a bigger scale of the problem is happening to China. They constructed massive aqueduct systems to move water around the country, primary from south to north. At the same time, for both industries and residential, the water price is virtually zero. China, therefore, became the least efficient water using country in the industrialized world.
The world really has enough water for everyone and everything. The real question is the price of transportation (or treatment, conditioning, desalination, etc.) If people are not willing to pay for the water, then they will run out of it eventually.