When referring to the "politically organized body of people usually occupying a definite territory" in lieu of the proper name, should state be capitalized?
He will liaise with State and local governmental regulatory departments.
There seems to be a fairly free choice. Certainly, any prescriptive 'rule' claimed to hold here would doubtless be challenged ... a capital to signify esteem, or a lowercase letter to show non-specificity.
The White House chooses:
- Powers not granted to the Federal government are reserved for States and the people, which are divided between State and local governments.
Whereas USA.gov uses
- Find contact information for state and local government services, your governor, and more.
And likewise IRS:
- Find tax information for federal, state and local government entities
Indeed, lower-case seems by far the more common choice.