Drought (moisture) indices can be useful tools for providing information to decision-makers in business, government and to the public stakeholders. A large number of drought indices exist, each having a variety of data input requirements and each providing a somewhat different measure of drought. Some of the more commonly used schemes include the Palmer Drought Severity Index (PDSI) and Moisture Anomaly Index (Z-index), Standardized Precipitation Index (SPI), Rainfall Anomaly Index (RAI), Standardized Anomaly Index, Effective Drought Index (EDI), Surface Water Supply Index (SWSI), Percent Normal, Deciles, and the Normalized Difference Vegetation Index-based Vegetation Condition Index. In addition, two indices for monitoring agricultural drought, the Evapotranspiration Deficit Index (ETDI) and Soil Moisture Deficit Index (SMDI), have recently been developed for the state of Texas. The main objective of this research was to examine all the existing drought monitoring tools to determine which are the most appropriate for monitoring moisture conditions at the local level in the state of Texas. Results indicate that the most appropriate drought index depends on the intended application, specifically: the time-scale of interest, type of drought being monitored (e.g., meteorological, hydrological, or water supply), location, and spatial scale of the application. An objective methodology for developing meaningful drought thresholds is also presented.