California faces enormous challenges as it struggles to adapt its water management system to 21st-century conditions. The state\textquoterights population continues to grow and to urbanize, increasing demands for urban water supply, reliable water quality, and flood protection. At the same time, the state\textquoterights economy no longer depends as directly on water to generate wealth: agriculture, which still consumes the lion\textquoterights share of water, represents a small fraction of overall employment and economic output, and manufacturing accounts for only a small fraction of total water use. All this is taking place as California faces the uncertainties of a changing climate\textemdashand as environmental concerns take greater precedence than they have in the past, affecting critical decisions in water management. These changes are leading to a rebalancing of water management objectives and approaches. In recent decades, many federal, state, and local efforts have sought to redress environmental decline, to adjust to the increasing scarcity and unpredictability of water supplies, and to rehabilitate crumbling flood protection infrastructure. But these efforts have proved inadequate. To avoid continued environmental and economic deterioration,California needs to make significant changes in water policy.