Choice (A) is grammatically correct and conveys the meaning of the sentence clearly. The phrase "the state has had with water shortages" is a clause describing "difficulties." The verb tense "has had," in the progressive present tense, is appropriate to describe something that began in the past and has continued into the present.
In choice (B), the pronoun "it" has no clear reference; there is no logical singular noun for it to refer to. We can eliminate choice (B), and choice (C), on the same grounds.
In choice (D), we have a run-on sentence, because there is no conjunction between the first independent clause (ending with "water shortages") and the second independent clause (starting with "the state"). We can eliminate choice (D).
Choice (E) presents the "water shortages" and the "difficulties" as if they are two separate things, distorting the intended meaning of the sentence. It also is unnecessarily wordy in using the pronoun "them" in close proximity to "shortages." We can eliminate choice (E).
The correct answer is (A).