A new economic analysis by Jay Lund (UC Davis), Josué Medellín-Azuara (UC Merced), and Alvar Escriva-Bou (UC Davis) shows the high cost of inaction on California’s perpetual water supply challenges, estimating that the state could lose enough water annually to supply up to 9 million households—with economic losses totaling between $3.4 billion and $14.5 billion per year, depending on the severity of the scenario.
The study, Inaction’s Economic Cost for California’s Water Supply Challenges, builds on prior research showing that California’s total water supply is on track to shrink by 12–25% by 2050, a loss of up to 9 million acre-feet per year, equivalent to one or two Lake Shastas. The new report emphasizes that without coordinated state action, these reductions could result in the fallowing of up to 3 million acres of farmland, the loss of 67,000 jobs, and lasting damage to California’s agricultural and rural communities.
The research underscores the urgency of Senate Bill 72, authored by Senator Anna Caballero, which would create the first-ever statewide water supply target and direct California to develop 9 million acre-feet of new water supply by 2040. The bill aims to bring federal, state, regional, and local partners together to better plan, invest, and build toward a more secure, reliable, and sustainable water future.
The study identifies four primary factors contributing to California’s anticipated water supply decline:
- Groundwater Management: Implementation of the Sustainable Groundwater Management Act (SGMA) limiting groundwater extraction.
- Climate Change: Diminished snowpack reducing natural water storage.
- Environmental Needs: Increased water requirements to support ecosystems and combat sea-level rise.
- Colorado River Reductions: Decreased allocations affecting Southern California.
“We’ve done the math—and the costs of inaction are high economically and environmentally,” said Dr. Jay Lund, Professor of Civil and Environmental Engineering at UC Davis. “California urgently needs a long-term, statewide strategy to prepare for growing water challenges ahead.”
While conservation efforts remain vital, the research indicates they alone are insufficient to address the projected water deficit. New investments in stormwater capture, water recycling, desalination, and storage and conveyance infrastructure are also essential.
“California’s water system was designed for a climate that no longer exists,” said Senator Caballero. “SB 72 provides a roadmap to adapt our water strategies and tactics to meet the demands of our changing environment, expanding economy, and growing population.”
“From the local perspective, a statewide strategy to improve California’s water resilience that includes long-term planning and investment will not succeed without measurable outcomes and timelines,” said Paul Cook, General Manager of Irvine Ranch Water District. “SB 72 represents a critical step toward aligning regional efforts with a broader, coordinated vision—ensuring that communities across California are better equipped to address ongoing and future water supply challenges.”
Last year, Senator Caballero authored a similar bill that enjoyed unanimous support from the Legislature in both houses but was vetoed by Governor Newsom due to budget concerns and a budget deficit. SB 72 includes many of the same provisions and with a better budget year projected and increased pressure from climate driven wildfires, the coalition is optimistic that the bill can generate unanimous legislative support again and get a signature from Governor Newsom.
Co-sponsors of SB 72 include the California Municipal Utilities Association (CMUA), the California State Association of Counties (CSAC), and the California Council for Environmental and Economic Balance (CCEEB).
To read the newest research, Inaction’s Economic Cost for California’s Water Supply Challenges, click here.
To learn more about SB 72, visit the state’s Legislative Bill Information portal.
