Power of the Market : Water Watch: A new formula for surviving the drought

California’s official rainy season ends this week. Despite some recent showers, here and there and now and then, reservoirs in central California are 2 million acre-feet lower than they were at this time last year. That amount would supply normal needs of 10 million people for a year, so it represents a shortage that just about guarantees rationing for most of the state at least through the summer.

Like it or not, the Golden State is digging in for a long struggle with drought in which it may neither be able to declare victory nor be forced to admit defeat for decades.

State political leaders squandered years of opportunities to expand California’s network of storage reservoirs and other projects to enhance water supply simply because the subject was politically distasteful. There is no hope of playing catch-up. In a state facing a $12.6-billion budget deficit, there is no money for construction. Even if there were, new projects could not help until the 2000s.

As a result, the state’s future rests largely on its ability to establish a banking operation for water, in which regions with more water than they need would sell some of it to areas that are short. A free market that would treat water like any other precious commodity should have been created years ago. Fortunately, Gov. Pete Wilson recognized that and is trying to make up for lost time.

As Times writer Bill Stall reported recently, there is a 50% chance of new water shortages by 1995 and a 75% chance that supplies will dwindle by 2000.

Of course, such odds come from the same computers, programmed with the same historical weather records, that declared improbable a fifth year of drought. The improbable fifth year will end this autumn, possibly ushering in a sixth dry year.

There was no guesswork about those repeated warnings from managers of the state’s big water distribution systems that California’s population was growing faster than they could expand those systems. But not one statewide political figure stepped forward to explain the disastrous consequences of ignoring this trend.

There is a hint of the high price of such negligence in a report by Spectrum Economics Inc. of San Francisco.

Based on a survey of 212 manufacturing firms in six counties each in Northern and Southern California, Spectrum estimated that half of the computer and office equipment companies in the north and nearly half of the state’s aerospace companies would consider relocating if they had to live indefinitely on 30% of normal water supplies.

Spectrum also estimated that such cuts in water supply would mean a statewide loss of 56,380 jobs, based on 1987 employment levels.

The 30% was not exactly pulled out of thin air, although no major water agency has linked such a number to long-term shortages. The survey also was financed--shades of “Chinatown”--by an association of thirsty urban water agencies.

For the foreseeable future, the best hope for avoiding shortages as large as Spectrum suggests is to buy water from farmers at prices high enough to make it worthwhile to leave land fallow.

The water bank Wilson created in Sacramento has 600,000 acre-feet on deposit and is negotiating for another 200,000. An even bigger water bank would result from a bill sponsored by U.S. Sens. Bill Bradley (D-N.J.) and Alan Cranston (D-Calif.).

It would rewrite the law governing the crucial federal Central Valley Project, which delivers nearly four times as much water to customers each year as the state project, which supplies Wilson’s water bank. The federal bill is especially attractive to the state’s big urban areas because it would allow farmers along the CVP system to buy and sell water under the same rules that govern state exchanges of water.

U.S. Sen. John Seymour (R-Calif.) opposes the bill on the dubious ground that this would mean Washington’s dictating to California how it should use its water supplies. Seymour should stop fighting the bill and join it.