WHILE campaigning for re-election as governor of Texas last year, Rick Perry often said that he was not too worried about the state's projected budget shortfall. Bean-counters in Austin, the state capital, had come up with sobering projections, but none of these were official estimates. But now the numbers are in. The comptroller, Susan Combs, recently totted up the receipts and handed down her verdict: $27 billion short for the 2012-2013 two-year budget period, with $72.2 billion available in general revenue funds, against a projected outlay of $99 billion. The state has only an estimated $9.4 billion in its “rainy day” fund.

In addition to the shortfall, unemployment in Texas, which was well below the national average for most of the recession, has nearly caught up. In January 2011 it was at 8.3%; the national figure was 9%. High unemployment has contributed to low sales-tax receipts, which make up almost two-thirds of tax revenue. These travails have drawn some Schadenfreude. During the recession, Texans were quick to point to the struggles in states like California, and to brag about the comparative advantage of Texas's low-tax, low-services model. For their part critics have long seen Texas's approach to public policy as harsh and short-sighted. They accuse the state of chasing growth at the expense of health, education, and infrastructure.

In some cases, the Texas emphasis on efficiency has yielded worthy results. In December, for example, a nationwide “Right on Crime” initiative, partly based on reforms from Texas, was unveiled. It advocates treatment and rehabilitation for people convicted of drug crimes rather than incarceration, on the grounds that treatment reduces recidivism and is more cost-effective over the long term. That is a conservative idea that liberals can support.

More broadly, though, is Texas getting an inevitable comeuppance? The state's Republican leadership has staked its reputation on fiscal discipline and a healthy economy. By those standards, they should be chastened by the budget gap and the high unemployment rate. And concerns about poor access to health care, creaky infrastructure, and a strained education pipeline are genuine.

Some of Texas's malaise must clearly be blamed on the weak national economy. The state has created more jobs than any other in recent years, including some 250,000 between December 2009 and January 2011. But it has also attracted more job seekers, and the rate of job creation has not kept up. Similarly, the state's responsibilities have grown since the previous budget cycle. Texas has added 4.3m new people in the past decade. To maintain services at their current levels would cost $12 billion more than it did in 2008-09.

The comptroller's office argues that Texas has now turned the corner. Export earnings were up 27% in 2010, for example. And strong crude prices will help; the Energy Information Administration forecasts that oil will average $93 a barrel in 2011, compared with an average of $79 for 2010 (and it could very easily be a lot more, depending on events in the Middle East). Mr Perry maintains that Texas can keep on attracting jobs. In his state-of-the-state speech on February 8th he made a point of welcoming executives from LegalZoom, a legal-documents company from Los Angeles that opened a regional office in Austin last year, nudged by generous incentives from the state and city.

Still, there is something troubling about the picture. Exports, commodities, and jobs lured from other places can only take you so far. For Texas to thrive, it must be capable of fostering talent and innovation, not simply importing it. The state and its cities have nurtured some industries, such as wind and solar, cybersecurity, and technology. Josh Williams, the head of Gowalla, a social-networking service set up in 2009, says that Austin was fertile ground for the business, partly because of the presence of the University of Texas and the low cost of living. But encouraging home-grown success in the future will require that Texas invest adequate resources in its human capital. And those resources are, at the moment, in short supply.

Texas will be able to close its budget gap this year only through brutal cuts, now being negotiated. The recommendations from the Legislative Budget Board, which advises the state legislature on appropriations, portend a difficult few years, especially for sick people, old people, and students. The suggested cuts to the primary programme that funds school districts, for example, would put the state $9.3 billion below the amount required by its own education code. If there is any correlation between state spending on public education and the performance of its schools, those are cuts Texas can ill afford.