[throwaway287391]

"There's nothing to prevent any state from funding the universities in their states."

I would've thought one major issue is that a much larger chunk of tax revenue is collected by the IRS than by any state. From googling, CA has the highest state income tax rate but still collects <5% of US federal tax revenue, while having >10% of the population. ~2.5x'ing state taxes to attain similar per-capita revenue would probably lead to a fair number of people leaving the state, or at least get the party who passed that tax hike (presumably Democrats) voted out in the next state election.

OTOH the NSF annual budget is $10B/year, in theory "easily" fundable by CA alone with its $220B/year in tax revenue, in the worst case with a 5% tax increase. The NSF isn't the only federal agency that funds research (seems to provide around 25% of federal research funding) but it is probably enough for one state, even the most productive one. So maybe it really is doable.