Despite heavy rains in March 1991, California continues to face a serious near-term water problem resulting from five years of drought. In fact, the amount of water in storage on October 1, 1991 was about equal to the amount in storage one year ago—a year in which strict conservation measures were imposed in some areas and there were significant reductions in water supplies for many agricultural users. In this paper, we provide background information on California's water system, the impact of the drought, water needs in the future, and legislative options for coping with water supply limitations.