WHEN Jerry Brown took office as California's governor in January 2011, the Golden State was a laughing stock. Its credit was poor, its politics venomous and its fiscal deficits larger than most states" budgets. Campaigning in 2012, Mitt Romney compared California to European basket-cases like Greece. He would not do so today. Earlier this month Mr Brown unveiled a budget with a surplus for 2013-14 forecast at $4.2 billion. In his state-of-the-state speech on January 22nd he spoke of "California's comeback" (see article). The state's job-creation rate is among America's best (though unemployment is still high at 8.5%), and in much of the state the housing market is reviving. Politically, Mr Brown is unrivalled; some excitable Democrats have even urged him to make a fourth run for president (although the first three, in 1976, 1980 and 1992, did not go well). Assuming that he seeks re-election in November, he should sail to victory. The tight-fisted Mr Brown - he is not above eating food from other people's plates - has imposed a measure of fiscal discipline on his state. In 2012, to many observers" surprise, he persuaded Californians to pass Proposition 30, a temporary income- and sales-tax rise. He has strong-armed California's Democratic legislators twice: first to accept deep cuts to cherished programmes such as child care, and then, once the deficit was plugged, to curb their spendthrift impulses. Even California's nearly extinct Republicans express grudging admiration. Yet California is not cured; it has swapped acute problems for chronic ones. Three stand out; and worryingly, Mr Brown seems little inclined to tackle any of them. First is the state's precarious tax structure. More than perhaps any other state, California relies on a small number of very wealthy people to pay for its public services. This year income taxes from the richest 1% (including capital gains) may account for one-third of the state's general fund. When the stockmarket is booming, as it is now, the state's coffers spill over. But when things turn nasty capital-gains tax revenues plummet and the treasury is starved. Mr Brown understands the harm that such volatility causes, but resists serious tax reform; instead he has proposed a rainy-day fund. This is, at best, a palliative. California's second problem is a mountain of liabilities: some $355 billion, mostly in the form of unfunded promises to provide pensions and health care to retired public servants. Mr Brown's budget chips away at this debt mountain, but mainly at the short-term bit. CalSTRS, the teachers" pension fund, is a particular worry; by one estimate it has enough money to last only until the mid-2020s. Yet Mr Brown proposes merely to begin discussing the problem this year. Meanwhile, the CalSTRS unfunded liabilities grow by $22m a day. The third problem is perhaps the most serious: a crisis of poverty and social immobility, particularly among Latinos (who will soon be the state's biggest ethnic group). Under the Census Bureau's "supplemental poverty measure," which includes cost-of-living adjustments and non-cash benefits, California has America's highest poverty rate: almost a quarter of its 38m residents cannot pay for basic necessities. California has always drawn in poor immigrants, but upward mobility seems to be stalling. In some inland regions unemployment is in double digits and schoolchildren struggle to read. Hardly anyone in Sacramento is even thinking about these issues. Out of the emergency room, into rehab Now that California's short-term crisis is over, Mr Brown should tackle its long-term problems. The tax base should be broadened: top rates should fall and sales taxes should be extended to some services. Some of the fresh revenues should be directed to measures that help the poor, such as pre-kindergarten education. The state should meet its obligations to CalSTRS in full, while finding ways to cut its long-term pension costs. And California should make it easier to start firms and create jobs. That means loosening the regulations that throttle businesses (see article). It can take two years to win permission to open a burger joint in California, compared with a few weeks in Texas. The California Environmental Quality Act allows almost anyone to sue to block almost any project; unions use the threat of an environmental lawsuit to blackmail employers into hiring unionised workers. Fixing these problems will be hard - Arnold Schwarzenegger couldn't do it, for all his tough talk. Still, Mr Brown is popular and faces no serious rivals, so it is a good time to start.