The 'crisis' is mostly one of pricing, in that farmers get the water for nearly free, so they use 80% of it in inefficient ways to produce low value crops, because hey, it's basically free. Cities pay much higher prices, but it almost never makes sense to pay ~$$$ for desalinated water just so you can keep giving away water for $ to other users.

I’ve heard that the farmers are getting the bulk of the water. I’m curious, could they use desalinated water instead? it would raise the price of food… But I’m just wondering if that is a bad thing given the trade-off.

You could farm with desalinated water, but the economics don't support it so no one would bother (or at least the current farmers with their current crops would not). We're 'running out' of free/extremely-subsidized water supplied by the government for mostly-low-value crops. No one will ever grow alfalfa with desalinated water that then needs to be moved via canal/aquaduct - the beef from the cows you fed with it would cost like $2k/pound.