The issues over allocation stem from the fact that the Colorado River Compact, signed in 1922 among the seven Colorado River watershed states, divided up the river's flow based on amounts that have never been reached since. They didn't have much data to go on--three decades' worth of measurements at most--and they overestimated the river's annual flow. It has never had the amount allocated, meaning that the river is in perpetual "deficit."
For a long time, this wasn't a problem. Nevada never came close to using its allocation until quite recently, because Las Vegas barely existed until the 1930s and was still a pretty small town for decades afterward. The Wasatch Front in Utah and the Front Range in Colorado, the respective population centers of the two states, are both quite distant from the Colorado in miles and topography. Arizona had a relatively small population before the advent of air conditioning. So the other six states were happy to let their allocations go to California--they had all they needed.
The water disputes that erupted between Arizona and California in the 1980s and 1990s were an object lesson for Las Vegas. Arizona wanted its full allocation, which would mean that California had to scale its own allocation back. Even then, Nevada's allocation was enough for Vegas--in fact, Nevada has never used its entire allocated percentage. In some cases, it traded allocated water to California and Arizona for future considerations--a practice called "water banking." Even so, Vegas anticipated a time when its allocation might be challenged or, in case of a basin-wide drought (like now), rationed. So the city and county (Clark) embarked on an aggressive water conservation campaign. The result is that today, Las Vegas uses less water than it did ten years ago, even though it's several hundred thousand greater in population.
So it's not politics--it's simple climate change. In point of fact, the Basin states have shown a remarkable degree of cooperation and willingness to compromise in the face of a dwindling water supply. Those who agreed to the Compact had not the remotest clue that the Southwest would grow as it did--back then, it was still considered a wasteland. And, as I said, they had bad information regarding just how much water was and would be in the Colorado.
Another kicker has been that agricultural use in Arizona and California dried up the Colorado to the point where it no longer reached the Gulf of California, which violated a treaty drafted in 1963 that guarantees at least 1 million acre-feet of water be released to Mexico. And when farmers in CA and AZ released additional water back into the Colorado, it was so salt- and mineral-laden that it killed crops in Mexico. So we built a huge desalinization plant in Yuma--but we're still obligated to deliver that minimum amount of water to them, and that amount was not included in the Compact.
The reality is that the Colorado can't supply all the needs of the Basin states, and there are precious few other water sources. So the only two solutions are: all the Basin states should emulate Las Vegas and acknowledge the fact that they live in a desert, and conserve water accordingly; or, some immense multi-trillion-dollar boondoggle can be built to bring water down from the Pacific Northwest or even Canada.
(And we could stop fucking up the earth's climate, but that ship has probably sailed.)