For Immediate Release: December 18, 1998

San Francisco, CA -- The $4 billion plan released today by CALFED fails to solve California’s water problem, according to Erin Schiller, an environmental policy analyst at the Pacific Research Institute for Public Policy. "The problem is not water supply, but poor allocation and management. Water markets, rather than multi-billion dollar water projects, offer Californians the best solution," criticized Schiller.

While most of the details still need to be worked out, CALFED’s proposal aims to secure a long-term water supply for the state and improve the struggling ecosystem of the San Francisco Bay-Delta -- the intricate web of waterways which provides two-thirds of the state’s drinking water; irrigates most of the Central Valley; and supports more than 750 animal species, as well as 40,000 acres of wetlands.

The seven-year plan will cost an estimated $4 billion and will be paid for by state and federal taxpayers, as well as by California water users. Some key proposals are $1.8 billion on new water conservation and recycling projects, $1 billion to widen Delta rivers, and $250 million to strengthen Delta levees. Also in the plan is a proposal to construct a controversial Peripheral Canal, a north-south canal already once rejected by voters in 1982 that would allow the state to channel large amounts of Northern California water south.

"CALFED’s proposal only postpones water shortages because it does not address the problem of poor management and centralized control," claims Schiller. "Presently the state leases water to users for a specific purpose, including both farmers and cities. Arbitrary rules govern who gets how much water and at what price, causing prices to vary greatly among users and ensuring that they do not reflect the water’s true value. Such management leads to misallocation, poor conservation, and numerous environmental and political problems."

Schiller’s research shows a statewide water market would prevent shortages by increasing efficiency and promoting water conservation. Under a market system, water rights users could trade, lease, or sell their rights to other users for different purposes. Water presently mandated for environmental purposes would go to environmental groups who would leave the water instream for water quality, fish habitat, and overall Delta improvements. Trade among water users not only gives users an incentive to conserve, but also means that water flows to it highest valued use.

Water markets make sense for California because water is a scarce and valuable resource, explains Schiller. In such cases, markets develop to balance supply and demand. Water rights in California are clearly defined and enforceable, and California has the infrastructure to transport large amounts of water, making it possible for water rights owners to trade those rights.

Says Schiller, "California has always struggled over water. Without markets to address the problems of management and allocation, CALFED’s proposal only postpones future water shortages and environmental problems."

###

For more information contact Jennifer Berkowitz at 415.989.0833

The Pacific Research Institute for Public Policy is a non-profit organization dedicated to the promotion of the principles of individual freedom and personal responsibility. The Institute believes these principles are best encouraged through policies that emphasize a free economy, private initiative, and limited government. By focusing on public policy issues such as health care, welfare, education, and the environment, the Institute strives to foster a better understanding of the principles of a free society among leaders in government, academia, the media, and the business community.