Textbooks on government invariably include sections on state and local government, but because of the diversity of political structures existing on the local level, most material is general and not very satisfactory in helping students understand their immediate political environment. This resource was put together to help teachers gather relevant information and put it into perspective. The document unfolds four major concepts--government has become the chief social institution charged with the responsibility of maintaining the stability of society, and this charge is made increasingly difficult as modern American society changes rapidly and intensely; an orderly procedure of self-taxation supports government; government, like all institutions of society, must respond to change, and in our form of democracy the nature and direction of government response to change is conditioned by the extent of popular participation in political processes; and state and local government units are created and altered to meet specific needs of people within those units. The four parts of the document are on the challenges the state governments must meet, the financing of services, the political processes for decision-making, and the delivery of services. (Author/IRT)