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Although the highway funding system is complex, the funding for maintaining a state road would typically be provided by the state government. States have a combination of local, state, and federal roads.
The "Texas State Government" is a noun, and it is proper to capitalize it. Just as you would capitalize the name of a person.
People in a territory ruled by a government
He believed that the state did not want change. And that if South America turned into a republican form of government that the state would fall apart because they would not have someone in charge.
That would be state capitalism.