The lake was fed by diverting water from nearby San Francisquito Creek. The university chose to stop filling the lake for recreational use in 2001 to protect the endangered California tiger salamander as the article notes. The lake was still sometimes artificially filled to support salamander breeding, but it was not maintained to a level suitable for (most forms of) recreation (though I still saw members of KA attempt to take a raft out on 1-2ft of water during a rainy week -- I think their raft was more full of beer than the lake was of water, though my memory is hazy).
The university has since removed the dam used to divert water to Lake Lag as part of a process of habitat restoration upstream. I'm not sure how that will affect the population of salamanders that depended on that water in Lake Lag, but I believe they also breed upstream and will have more sustainable natural habitat. Also, water from Searsville Dam just upstream from this project is used to irrigate Stanford's golf course, and that is cited as a reason not to remove that dam (the other reason is that removing it would change habitats that formed from the lake it created).
The school has sometimes turned off its campus fountains during periods of drought. They shut the fountains down for 2 years while I was there. During that same time I didn't see them shut off water to the golf courses though, and that consumes substantially more water than the fountains. They did restore water in the fountains for the weeks leading up to our graduation, and I can recommend grabbing a pitcher of beer or two from the CoHo and walking it straight down to the fountain outside the bookstore for a soak, if the school still allows it.
To summarize, if we are to infer Stanford's priorities based on how it has approached the complex dynamics around Lake Lag and its (former) tributary, I believe that would look like: golf course > endangered salamander > students.