SAN FRANCISCO — California Gov. Arnold Schwarzenegger declared a state emergency because of a drought and said he will consider mandatory rationing in the face of nearly $3 billion in economic losses this year.

Agricultural revenue losses in the coming season in California could top $2 billion, he said.

Schwarzenegger (R) requested that urban users cut water consumption by 20 percent and that state agencies implement a water-reduction plan.

The state water department will report on conservation progress by the end of March, and if the situation has not sufficiently improved, water rationing and mandatory cuts in water use could be instituted, the governor said.