Analysis: For hints to next year’s fights at the Texas Capitol, watch the investment advisers

If you’re more interested in policy than in politics, you might be thinking less about the upcoming elections and more about things like sports gambling and the recent U.S. Supreme Court ruling on that topic, about the failure of state governments to keep up with inflation in public education, or about the effects of e-commerce on retail stores and what that might mean for sales and property taxes.

First, congratulations: You really are a nerd, just as your family and friends probably suspected.

Second, a pro-tip: One way to peek around the corner into the future — when you’re talking about state government — is to see what the finance folks are talking about. Not the donors, who are important for political questions, but the investor community and the people who analyze stocks and bonds and debts and markets for them.

Outfits like Moody’s Investor Service, Standard & Poor’s, Fitch Ratings and their ilk are often poking through issues that lawmakers will be talking about later on. In Texas, the next regular legislative session starts in January. Legislators are juggling elections and pre-session “interim charges” right now in anticipation of that gathering.

That recent ruling on sports gambling set off a round of papers (and probably will spark legislation in Texas and elsewhere) after the Supreme Court said that a federal ban was unconstitutional. Texas has a ban of its own, but state lawmakers can now throw the dice if they want to.

Don’t expect that to be a wildly profitable enterprise, however. Moody’s short report on the topic points to the $150 billion underground sports gambling business and to the relatively meager squeezings available to states that tap into it: “The potential for legalized online gaming within states does offer a new, easily accessible, opportunity. Still, relative to their total budgets, the revenue boost will be minor for states even under the most optimistic of scenarios.”

That echoes what Texas Comptroller Glenn Hegar has already said about it, but Moody's is a third party and buttresses his argument. So do similar assessments from Fitch and S&P.

That one isn’t going to build many roads or schools. Still, you can tell it’s on the minds of the folks in the public finance business.

So is school finance, and not just in Texas. Another report from Moody’s cites “increased public demand to increase K-12 education funding, which has notably slowed since the 2008-9 recession” and says that could compete with Medicaid and pension funding in state budgets across the U.S. This line about states in general could just as well be about Texas alone: “States have significant flexibility to adjust their budgets to meet policy demands, especially as tax revenue growth has strengthened in the past year; willingness to do so varies, however, and states will continue to be pressured to balance K-12 spending with other program demands.”

Texas doesn’t have the deep pension problems faced by other states, but that issue is on the private sector’s watch list. So is local debt, as you might expect. They’re even looking at “environmental risks in U.S. state and local government ratings” — the title of a recent report from Fitch.

That landed on the eve of hurricane season. You might not be aware of this, but weather can affect local bond ratings, and gets attention from the money people: “Rating actions directly linked to climate change or natural disasters have historically been limited, a notable anomaly being Hurricane Katrina and subsequent downgrades of the state of Louisiana and affected areas. However, the damage to vital infrastructure and widespread repopulation that was seen during Katrina has become more commonplace, most recently with Hurricanes Harvey, Maria and Irma last year.”

They’re watching retailers, too, as you might expect if you’ve noticed the wave of malls and major retailers closing or scaling back. For local and state governments, that means lost jobs and less revenue from property and other taxes. There’s an offset in the rise of e-commerce and its need for workers and warehouses, according to Moody’s. And there’s a chance that a pending Supreme Court ruling on online sales taxes will benefit states that, like Texas, lean heavily on those revenues.

The arguments you hear during the elections will drive some of what the Legislature does when it comes back in January, but for the really big stuff — schools, roads, taxes, disaster relief — watch the money.