More than gold, glitz, railroads, or ranching, water defines the Western U.S. In an area that’s mostly arid, water is the most precious commodity. Since the first settlers crossed the Great Plains, the question of how to divide this finite resource has dominated public policy. And since 1922, when the seven states along the Colorado River entered into formal agreement to divide up its water, lawmakers have had to repeatedly re-negotiate the terms on how to divide a shrinking supply of water. But for the last three years, they couldn’t. So this summer, the federal government stepped in. How this latest skirmish in a centuries-long debate is settled will have major implications for not just the west, but all taxpayers.

An already difficult situation has been made worse with Lake Mead and Lake Powell at historically low levels, and the river no longer reliably providing close to enough water to meet all the demands placed on it. This is a system taxpayers have spent generations and billions of dollars building and maintaining. The fights have been legendary and now the states have to figure out how to live with even less water.

In July, the Bureau of Reclamation released its plan for managing the river after the current operating guidelines expire. For 2027 and 2028, the first tier of shortages would require Arizona, California, and Nevada to collectively reduce deliveries by 1.25 million acre-feet a year. The four Upper Basin states face no comparable mandatory cuts, although the plan assumes up to 200,000 acre-feet a year in voluntary conservation.

You can probably guess how that went over.

Nevada has sued the Department of the Interior, arguing that the plan unfairly burdens the Lower Basin. Arizona could follow. Tribal governments with substantial rights to Colorado River water have also objected to being excluded from key parts of the negotiations.

There are complicated legal and political questions here. But there’s also a fairly simple taxpayer question. We’ve spent decades subsidizing water use. How much more should taxpayers spend subsidizing people not to use it?

For generations, the Bureau of Reclamation has provided subsidized irrigation water through below-market rates, interest-free financing, and repayment arrangements that shift infrastructure costs onto taxpayers. Large agricultural operations get an even better deal than municipalities and have especially benefited from cheap federal water even as scarcity throughout the basin has grown more severe.

And cheap water has consequences. When something costs less than its actual value, there is less incentive to conserve it.

The problem goes back even further. When federal and state governments negotiated the Colorado River Compact in 1922, they assumed river flows would average 16.4 million acre-feet a year. An acre-foot is the amount of water it takes to cover one acre of land in one foot of water (it’s 325,851 gallons). But that assumption was overly optimistic. According to the Congressional Research Service (CRS), actual flows averaged about 14.6 million acre-feet from 1906 through 2024. Since 2000, they’ve averaged just 12.4 million. Consider how much development has occurred in this region over the last century. Demand has easily exceeded those allocated amounts in most years.

Put simply, we’ve spent decades trying to divide more water than the river reliably provides. Now taxpayers are being asked to help close that gap.

Federal dollars are increasingly being used to pay water users to conserve. Some temporary assistance may make sense. A sudden reduction in water availability has real economic consequences, and federal funding can help ease the transition.

But taxpayers should know what they’re buying. CRS estimates that Lower Basin states will conserve about 1.3 million acre-feet in 2026. About 533,000 acre-feet will come from uncompensated reductions under previous agreements. Another 770,000 acre-feet will come from reductions paid for with federal funding provided through the Inflation Reduction Act. In other words, well over half of those water savings are federally compensated.

And that still isn’t enough. Studies cited by CRS estimate that stabilizing the system over the long term could require reductions of 2.4 million to 3.2 million acre-feet every year.

If much larger reductions are necessary, are we headed toward years of federal payments to secure them? Are those payments producing water savings that wouldn’t otherwise occur? And are we doing anything to change the underlying incentives that encouraged overuse in the first place?

There’s an obvious danger here. Taxpayers could wind up paying to provide water at subsidized prices and then paying again to convince users not to take it. That’s not much of a water policy.

The new federal framework doesn’t solve the larger problem either. After three years of negotiations failed to produce an agreement, the Bureau of Reclamation established operating rules for the next two years. Many of the hardest questions about how to divide the river over the long term remain unresolved.

Meanwhile, litigation has begun and calls for more federal money have already started. CRS notes that states and some members of Congress have called for federal funding to cushion the effects of future water-delivery reductions, similar to the conservation funding provided through the Inflation Reduction Act.

Congress should be careful here.

Additional federal funding must help fix the incentives that got us here rather than simply make the immediate disagreement go away. Conservation payments should produce real, verifiable water savings. Federal assistance shouldn’t perpetuate artificially cheap water for agriculture, municipalities, or industrial interests. And beneficiaries of federally financed water infrastructure should have stronger incentives to account for the actual scarcity and cost of the water they use.

Taxpayers for Common Sense has been making this argument for more than two decades. This isn’t about pretending there’s an easy market solution to a river shared by seven states, tribal nations, Mexico, cities, farmers, and roughly 40 million people. It’s about recognizing that federal policy helped create some of the incentives we’re now trying to undo.

There is no painless solution to the Colorado River’s problems. Everybody must be wiser about water use. Communities and industries both will have to adjust. And taxpayers have a role in helping the region make that transition. But federal policy shouldn’t encourage overuse, subsidize it for decades, and then hand taxpayers another bill to fix the consequences.

We’ve already paid plenty. The next round of federal spending must help solve the problem, not subsidize another way around it.