US state about to encourage fairground attraction (8)
I believe the answer is:
carousel
'fairground attraction' is the definition.
(type of ride at a fair)
'us state about to encourage' is the wordplay.
'us state' becomes 'Cal' (abbreviation for California).
'about' indicates putting letters inside.
'to encourage' becomes 'rouse' (rouse can mean to encourage or stimulate).
'cal' going around 'rouse' is 'CAROUSEL'.
(Other definitions for carousel that I've seen before include "A closure (anag.)" , "Luggage conveyor belt and fairground ride" , "fairground entertainment" , "Rodgers/Hammerstein hit" , "Conveyer belt for arriving air travellers' luggage" .)