Perhaps the federal government should step in and gradually step down the level of subsidies given to farmers in California and gradually increase subsidies given to NEW farmers in other, more water rich parts of the country. This would have the effect of moving farms to more sustainable locations in the country. Sure, the types of crops produced would change and consumer demands would have to shift with that, but that isn't the worst thing in the world.
Another solution is to allow utilities to drastically increase water prices for communities that import most of their water anyways.
All in all, both solutions are geared towards population displacement in unsustainable locations. Just as New Orleans is probably destined for another Katrina, SoCal is probably destined to be a desert despite the demands we've put on the land in the last century.