"State aid is turning up in pub" - anonymous source (7)
I believe the answer is:
indiana
'state' is the definition.
(Indiana is an example)
'aid is turning up in pub anonymous source' is the wordplay.
'is turning up' says the letters should be written backwards.
'in' indicates putting letters inside.
'pub' becomes 'inn' (I've seen this before**).
'source' indicates taking the first letters (I've seen 'sources' mean this).
The initial letter of 'anonymous' is 'a'.
'aid' written backwards gives 'dia'.
'dia' placed into 'inn' is 'indian'.
'indian'+'a'='INDIANA'
(Other definitions for indiana that I've seen before include "member of 2 [THE STATES]" , "___ Jones (Raiders of the Lost Ark)" , "___ Jones, Harrison Ford hero - US state" , "Gary's place" , "State between Illinois/Ohio" .)