*Editor's note: This story has been updated throughout.

Travis County prosecutors decided to drop a number of criminal cases involving state government — including an investigation of contracting by the state police — after Gov. Rick Perry vetoed state funding for their office, according to officials there.

“We dropped a number of tax fraud cases and sent them back to the comptroller, and a number of insurance fraud cases and sent them back to [the Texas Department of Insurance],” said Gregg Cox, who heads the public integrity unit at the Travis County district attorney’s office. “And we just had a number of cases that were not close enough to grand jury ready. It’s a situation where we had to decide which cases to pursue.”

Several of those involved contracting issues at the Texas Department of Public Safety, Cox said. 

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In 2013, Perry vetoed $7.5 million in state funds for the unit after Travis County District Attorney Rosemary Lehmberg refused to resign after she was charged with drunken driving.

The Houston Chronicle reported Friday that an investigation into no-bid contracts at the Department of Public Safety was dropped after the state funding disappeared, and quoted Cox as saying the decision was related to the cuts. He said Saturday that he is not aware that the governor or anyone else in state government knew which cases might get dropped or carried forward after the veto, but said his office was forced to decide which cases would survive the state's budget cut.

“The majority of these decisions were made over the course of the summer of 2013,” Cox said. “I needed the staff we still had there to help educate me on where we were on things before the cuts took effect.”

Prosecutors were looking at contracts between the state and Abrams Learning and Information Systems Inc., a Virginia company helping with the state’s border security, according to the Chronicle. That relationship started with a no-bid contract issued on an emergency basis in 2006 for $471,800 and expanded over time — with no bidding — to more than $20 million, the paper said. The investigation lasted for more than a year before prosecutors decided, in the wake of their funding cuts, to drop the case.

“This is something that could be picked back up if another agency did some investigation on it,” Cox said. “We ordinarily rely on other agencies to do the investigating and bring them to us.”

The case reported by the Chronicle was one of several set aside by prosecutors, Cox said. It was more developed than others, but was not ready for full consideration by a grand jury.

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“It needed more work,” he said. “There were multiple cases and they were at different stages, all involving DPS contracting issues. One went to the grand jury and more information was needed before we could present it again. Another needed some work before we could present it. One was really at an earlier stage.”

He did not offer details of those other inquiries. They, along with other, unrelated cases involving state government issues, were filed away after Perry’s veto.

A spokeswoman for the governor said the contract investigation and the veto were unconnected.

"The governor vetoed this funding for no other reason than the fact that despite the otherwise good work the public integrity unit's employees, he could not in good conscience support continued state funding for an office with statewide jurisdiction at a time when the person charged with ultimate responsibility of that unit has lost the public's confidence," said Lucy Nashed. "This unit is in no other way held accountable to state taxpayers, except through the state budgetary process."

At the time of the veto, prosecutors said they would be forced to stop considering some state cases on tax and insurance matters; after looking through other cases, it became clear that other work would have to stop, too.

“There were a number of things that had to be shut down, and that was one of them,” Cox said. “It had a lot to do with what stage we were in. Things that were ready for the grand jury, we went forward. Things that were further away, I guess triage is a good way to describe it.”

The revelation that prosecutors dropped the DPS case came days after legislative leaders said the public integrity unit’s funding is still in peril. Lt. Gov.-elect Dan Patrick does not want to restore the funding, suggesting state cases now handled by Travis County should be in the hands of the state attorney general, a special prosecutor or by the home counties of the public officials in question. The budget proposed by Texas House leaders on Thursday would restore funding to the Travis County office, but only if unspecified changes are made.

The Legislature included money for the local prosecutors during the 2013 session, continuing to help finance state ethics, tax, insurance and other cases that are based in the state’s capital city.

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During that same session, Lehmberg was convicted on drunken driving charges after a late-night arrest and the flurry of videos on social media after her arrest. She served a short jail sentence and said she would not seek re-election when her term as district attorney ends two years from now. Perry said he would not allow state funding of her office unless she agreed to step down, and later followed through, vetoing the funding when she ignored his threat.

Perry was indicted last year after a Travis County grand jury — empaneled by a visiting judge and guided by a special prosecutor not affiliated with Lehmberg’s office — decided the governor should go to trial on charges that he abused his powers by conditioning the veto on Lehmberg’s resignation.

Lawyers for Perry are trying to strike the indictments as he begins serious exploration of a second run for president; if that effort fails, he could have to stand trial this year.