In the federal system, state governments function to implement and enforce laws, manage local affairs, and provide essential services to citizens. They have distinct powers enshrined in the U.S. Constitution, allowing them to legislate on issues like education, transportation, and public safety. State governments also have the authority to collect taxes and regulate commerce within their borders. Interaction with the federal government involves balancing state interests with national policies, resulting in a dynamic relationship that often shapes the nation's political landscape and policy outcomes.