California's Governor Arnold Schwarzenegger declared a state of emergency, on Friday, in the face of a severe drought. He said that he was contemplating mandatory water rationing in as a consequence of nearly $3 billion in economic losses from below-normal rainfall this year.

"California faces its third consecutive year of drought and we must prepare for the worst -- a fourth, fifth or even sixth year of drought," said Schwarzenegger in a statement.

Schwarzenegger beckoned the urban users to reduce their water usage by 20 percent and state agencies to implement a water reduction plan.

Meanwhile the work on infrastructure has been fast tracked. Legislators have revived a $10 billion bond package to construct new dams, fund conservation plans and erect plants to recycle waste water and recharge aquifers.