1. Three Branches A. A tool states use to achieve policy goals as well as to generate income to pay the states ' expenses 2. Police Power B. A state's role as a small, safe place to experiment with creative solutions to problems 3. Stakeholders C. The fundamental authority that lets states make rules to keep society safe and prosperous , even if some rights may be limited . 4. Taxation System D. Together, they govern by passing, implementing, and enforcing the laws that determine the state's policies , actions , and financial affairs . 5. Innovation Incubator E. Those outside of state government who give feedback about state policies and actions that affect them