Why is that inevitable? In fact most of CA's water allocation is driven by the free market (and local counties), not the government. Unfortunately it means that things like almonds get way too much water compared to what's useful by society or locals (since much is shipped abroad), and deregulation means farmers pump water from underground that can't be replaced for temporary gains. These are just some examples of where the market fails.

I suggest you watch this very informative talk by the water board director to the MIT alumni club last year to help clarify your POV: http://m.youtube.com/watch?v=rShYQVZvX-k