The unfortunate truth is that we actually need to use that water. Roughly 80% of California's water consumption goes to agriculture. [1] I can't speak to whether that water is allocated or used as effectively as it could be, because I'm not familiar with the agriculture industry. [2] That said, I do know that California is a major food producer for the rest of the country. Assuming agricultural water use is as efficient as can be expected (i.e. not blatantly squandered), the only answers are to reduce food production (to the detriment of California food producers and anyone who buys our food) or maintain/increase the water supply. Limiting residential and non-agricultural water usage will slow the bleeding, but not enough to solve our water problems.

1. http://www.environment.ucla.edu/reportcard/article4870.html

2. I suspect that we would see improvements in the situation if water were priced appropriately, which to my casual knowledge is not the case, especially for our farmers. I believe right now our government picks the "winners and losers" of water allocation, which upsets the losers, and doesn't encourage the winners to explore less water-intensive farming methods. But again, I could be drastically oversimplifying a situation I am not well educated on.

or too many people even when each uses a reasonable amount of water