1. To begin with, the law applies to a public servant's misusing property that is in his "custody or possession." What property was in the governor's custody or possession?
2. Beyond this, how does vetoing the appropriation qualify as "misuse," in the sense of "dealing with" the $7.5 million "contrary to an agreement under which defendant held such property or contrary to the oath of office he took as a public servant"?
3. Is the prosecution's theory that vetoes of appropriations are criminal if they are not seen as "faithful[] execut[ion of] the duties of the office of Governor" -- though deciding whether or not to "approv[e]" a bill is itself part of the duties of that office? Or is it that such vetoes are criminal if they do not "to the best of [the Governor's] ability preserve, protect, and defend the [federal and state] Constitution and law. ###
Prof. Volokh's longer and more detailed analysis is here.
Something else brought up in the post is the Constitutional question. The Texas Constitution gives the Governor plenary veto power. The indictment, if accurate, is a violation of a mere statute - an act of the legislature. Can an act of the Legislature abrogate a Constitutionally vested power of the executive in any circumstances.