Two billion reasons to pay attention to Beacon Hill today

You might say that it's not particularly glitzy or glamorous. Some might say it's truly boring. Most people probably don't know it's even happening.

But, the so-called "consensus revenue hearing" at the Statehouse today is probably the most important (public) meeting that Beacon Hill politicians will hold all year long.

State law requires Beacon Hill leaders to meet each year to reach consensus on how much revenue they estimate the state will take in during the next fiscal year. This estimate forms the basis for how much money will be on the table when leaders craft the state budget over the next few months.

Here's the inside track on what's at stake.

By most accounts, the state is looking squarely down the barrel of a $2 billion budget gap going into FY2012. Much of this is due to the fact that state leaders plugged holes in the state budget with more than $1 billion of one-time federal economic stimulus funding in recent years. That money will disappear next year. State leaders have also spent down the state's Rainy Day Fund to the point that Wall Street is starting to wonder if we're spreading ourselves too thin.

The consensus revenue estimate is just that – an "estimate." By it's nature, it's basically a guess as to what revenues will be like in the coming year. And, although it has the appearance of being an objective, almost academic review of state finances coupled with scientific forecasts of revenue, make no mistake about it: the hearing is just as charged with political considerations as any other hearing on Beacon Hill.

So, how will state leaders react today?

One option would be to paint an overly-rosy picture of state finances at the consensus revenue hearing. Projecting higher revenues would create a smaller gap to fill, thereby lessening the need for cuts or tax hikes. The problem with this option is that it only works for a certain amount of time unless higher revenues actually materialize. Budget writers would have just kicked the problem down the road and postponed action on it. But, from a political perspective, this option is attractive because a problem delayed is a problem saved (so to speak).

Another option would be to emphasize the size of the gap as a way to create political support for making budget cuts and/or raising taxes. This is a more responsible option. However, there is a separate trap if revenues are understated because it creates a mid-year budgetary surplus - which is inevitably spent on supplemental items.

The best outcome from today's hearing would be if political leaders leave politics at the door of the hearing room and do their best to give taxpayers their honest and accurate account of the budget crisis looming next year. If there's really a $2 billion budget gap awaiting us, say so. Then, there needs to be a comprehensive review of state spending over the next few months, coupled with a substantive overhaul of the way the state provides essential services. This stem-to-stern review is the only way to make the large-scale cuts that will be needed to fend off a sizeable tax increase next year – a tax increase that no one in this economy would be able to afford.

That's what we think. How about you? What are your thoughts? Please post a comment below.