Schwarzenegger has until midnight Sunday to make that decision.
"Sadly, there is little in the way of progress. We, as the assembly and senate republicans, put forward a number of alternative proposals and solutions to deal with the defects of what is frankly a bad bill right now," said Sam Blakeslee, the assembly's minority leader.
"This has been a vexing and almost impossible issue for policymakers to solve," said Sen. Darrell Steinberg.
The governor is pushing for more reservoirs and a new water storage system to help central California farmers.
Lawmakers are arguing over conservation and who should pay for improvements.
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