A simulation-optimization model has been developed for the optimal management of the city of Santa Barbara's water resources during a drought. The model, which links groundwater simulation with linear programming, has a planning horizon of 5 years. The objective is to minimize the cost of water supply subject to: water demand constraints, hydraulic head constraints to control seawater intrusion, and water capacity constraints. The decision variables are montly water deliveries from surface water and groundwater. The state variables are hydraulic heads. The drought of 1947-51 is the city's worst drought on record, and simulated surface-water supplies for this period were used as a basis for testing optimal management of current water resources under drought conditions. The simulation-optimization model was applied using three reservoir operation rules. In addition, the model's sensitivity to demand, carry over [the storage of water in one year for use in the later year(s)], head constraints, and capacity constraints was tested.