The problem is not that he would have vetoed the money, but rather that he used the threat of a veto to endeavor to influence a duly-elected official over whom he had no direct oversight. Basically, the indictment relates to two Texas statutes.
Here's the first:
Sec. 39.02. ABUSE OF OFFICIAL CAPACITY. (a) A public servant commits an offense if, with intent to obtain a benefit or with intent to harm or defraud another, he intentionally or knowingly: (1) violates a law relating to the public servant’s office or employment; or
(2) misuses government property, services, personnel, or any other thing of value belonging to the government that has come into the public servant’s custody or possession by virtue of the public servant’s office or employment.
Simply, this means that he was violating a law which says he was interfering with Rosemary Lehmburg's ability to do her job. Here's the second:
Sec. 36.03. COERCION OF PUBLIC SERVANT OR VOTER. (a) A person commits an offense if by means of coercion he:
(1) influences or attempts to influence a public servant in a specific exercise of his official power or a specific performance of his official duty or influences or attempts to influence a public servant to violate the public servant’s known legal duty; or
(2) influences or attempts to influence a voter not to vote or to vote in a particular manner.
(b) An offense under this section is a Class A misdemeanor unless the coercion is a threat to commit a felony, in which event it is a felony of the third degree.
(c) It is an exception to the application of Subsection (a)(1) of this section that the person who influences or attempts to influence the public servant is a member of the governing body of a governmental entity, and that the action that influences or attempts to influence the public servant is an official action taken by the member of the governing body. For the purposes of this subsection, the term “official action” includes deliberations by the governing body of a governmental entity.
Here, Perry would seem to be in violation of Section (1) as removing Lehmberg from her position would certainly undermine her sworn duty to perform her official duties. Further, under Section (c) it would seem Perry was trying to undermine the ability of Lehmberg's office to continue their investigation into the Cancer Fund. We're talking about misappropriation of public funds, and that, too, reaches back to Rick Perry's offices.
From a legal standpoint, the indictment has more legs than political pundits give it.
From a political standpoint, this is one of the best things that could have happened to Rick Perry. It actually helps his chances in the 2016 primaries. Since an indictment is not a conviction, and wheels slowly turn, it's unlikely that Rick will do any jail time between now and 8 November 2016. Because the press on both sides is portraying this as political pandering, it actually helps his case with Republican primary voters. Yes, kids, indictments in that regard would also help Scott Walker and Chris Christie.
Will he be convicted? Probably, but it will be reversed on appeal. That's how the legal system works in Texas. Sad but true.
Make no mistake though, this is NOT political pandering and this is not an attempt to deny the governor the right to utilize a line item veto. Further, Rosemary Lehmberg is not a nice drunk. She knows this, and will serve out her term and retire from politics. But this actually is a violation of the public trust, it is coercion of a public official, and that's not a good thing.