California Governor Arnold Schwarzenegger on Friday declared a state of emergency and warned of possible mandatory water rationing as the state struggled through its third consecutive year of drought.

Although the level of precipitation is 75 percent of the normal level this year, key state reserves are below 35 percent capacity, which has generated nearly three billion dollars in losses this year.

"Even with the recent rainfall, California faces it third consecutive year of drought and we must prepare for the worst: a fourth, fifth or even sixth year of drought," Schwarzenegger said in a statement.

"This is a crisis, just as severe as an earthquake or raging wildfire, and we must treat it with the same urgency by upgrading California's water infrastructure to ensure a clean and reliable water supply for our growing state."

He called on urban users to reduce their water consumption by 20 percent, while also requesting that the state government cut its water use.

"Agricultural revenue losses exceed 300 million dollars to date and could exceed two billion dollars in the coming season, with a total economic loss of nearly three billion dollars in 2009," Schwarzenegger said in an emergency proclamation.

It was the second emergency proclamation in less than a year in California, the largest US state with a population of nearly 37 million and a strong agricultural industry.