Funding a mine in small US state (7)
I believe the answer is:
capital
'funding' is the definition.
'a mine in small us state' is the wordplay.
'mine' becomes 'pit' (down the pit).
'in' indicates putting letters inside.
'small us state' becomes 'cal' (abbreviation or 'small' form of California).
'a'+'pit'='apit'
'apit' inserted into 'cal' is 'CAPITAL'.
(Other definitions for capital that I've seen before include "Topping" , "Cardiff, say" , "What starts this clue" , "Money saved or invested - seat of government" , "high in architecture" .)