California is on the verge of "five major, protracted water crises" and must change its system of governance to address the urgent situation, according to "Managing California's Water," a comprehensive examination of the subject recently produced by the Public Policy Institute of California.

The report recommends creating a Department of Water Management that is headed by an appointed director whose term overlaps different governors' administrations. This department, which could have cabinet-level status, would house a "public trust advocate" to ensure water is put toward reasonable uses and, for the first time, would have significant groundwater oversight.

The report also recommends:

• Establishing a water independent system operator (like the state's ISO for electricity) to serve as a clearinghouse for water transfers

• Assigning control of the State Water Project to a new public utility, which would be run by the ISO board of directors

• Creating nine "regional stewardship authorities" that would be like the existing regional water quality control boards but with new responsibilities for water supply, flood management and ecosystem management

• Expanding the role of the Department of Fish and Game

 "Our starting point on this is that we have not been successful in aquatic ecosystem management," said Ellen Hanak, a senior fellow at PPIC and one of eight report co-authors. "So much of this is done at the local level. Our suggestion is to scale up and be more comprehensive."

California's current system for managing water is anything but systematic. It's an extraordinarily decentralized system that, according to PPIC, "has often resulted in uncoordinated, fragmented water and land use decisions that contribute to chronic groundwater overdraft, impairment of watersheds by a wide range of pollutants, ineffective ecosystem management, and rapid development in poorly protected floodplains. Similar coordination failures among state and federal agencies have led to inefficiencies in reservoir operations, ecosystem management and water marketing, among others." (The full report is available on the PPIC website.)

Although the report does not get into details, the authors clearly see a need to better link land use planning decisions and water decisions, especially with regard to floodplain management.

The five crises that the PPIC sees as "virtually guaranteed" unless reform is implemented are:

• Extinction and decline of native species.

• Catastrophic floods

• Water scarcity

• Deteriorating water quality

• Decline of the Sacramento-San Joaquin Delta.

The PPIC authors would beef up the Department of Fish and Game, which they say does not exercise all of its legal authority. The recommendation is to return the appointed Fish and Game Commission to its original role of overseeing fish and hunting, and making the department a more vigorous research and management entity. The agency would work closely with the new Department of Water Management and federal agencies to establish flow standards for the environment. The regional authorities and local entities would then figure out how to meet those standards, Hanak said. If a region did not perform adequately, state agencies would swing their regulatory hammer.

The recommendation to give the new Department of Water Management some control of groundwater is potentially the most controversial recommendation. However, the move would help get California past the legally established – but scientifically fictitious – notion that groundwater and surface water are separate things.

The report urges better use of markets to improve water efficiency. As Hanak explained, "If you accept that we're not going to be increasing water supplies, and that supplies might actually decrease because of changing climate conditions, and you consider population growth and environmental demands, there's going to be less slush in the system. There has got to be more efficiency."

This is where the new water ISO would come in, serving as a clearinghouse to arrange arm's-length transactions between sellers and buyers. "Our water market has really stagnated," Hanak observed.

Creating a new public utility to manage the State Water Project (SWP) is not an entirely new concept. As Hanak said, "There's an emerging consensus that something has to happen with the State Water Project."

Currently, the Department of Water Resources runs the SWP. During most years, the SWP diverts 2 million to 3 million acre-feet of water from the Delta to Southern California cities and Central Valley farmers. However, a lack of resources has harmed the existing department's ability to manage the system. In addition, the PPIC identified a conflict between the department's role as a major holder of water rights, and its role for statewide water management.

Some SWP contractors have said they should take over the system, but neither the PPIC nor the Little Hoover Commission – which reached many similar conclusions last year – endorse that approach.  The PPIC recommendation is based on the idea of managing water as a public commodity, which the PPIC describes as "balancing the public benefits of water and its value as an economic input." Only a disinterested entity could strike that balance.

Reaction to the 450-page report has mostly centered on resource management recommendations (such as managing species at the ecosystem level rather than species-by-species) proposals for new fees, and on whether the PPIC was too hard or too soft on agriculture. The Association of California Water Agencies issued an entirely noncommittal response. There's been little comment on the governance proposals, although former Natural Resources Secretary Lester Snow noted that the difficulty of a reorganization is often inverse to its effectiveness. That's a fair enough point.

Still, the reorganization strikes me as crucial. I don't know whether PPIC's proposal is the right one. I do know that, like most aspects of California government, our current water management system evolved piecemeal over a long time period and often based on court rulings No one starting from scratch would recommend our fragmented system, which frequently works against itself and is ill-suited to a state where water demand is rapidly outstripping supply.

– Paul Shigley