In your own opinion, which government functions would be best handled by state governments? check any that apply. making treaties with foreign countries running schools issuing driver's licenses fighting wars against foreign enemies borrowing money

Federalism is the separation of government powers on a national level and a state level.  This is a system that prevents the federal government or individual state governments from becoming too powerful.  Each level of government has its own roles and responsibilities, and some of these powers are shared.  This is similar to the idea of separation of power between the three branches of government- legislative, executive, judicial- so one branch or group of people cannot abuse their power.

According to the U.S. Constitution, there are specific powers that the federal government has, such as making treaties and waging wars against foreign nations.  However, certain powers are reserved for the states.  From your list, states can and do:  a)  run schools, b) issue drivers' licenses, and c) borrow money. 

There are many other examples of federal powers and state powers that can be seen in the attached diagram.  (Courtesy of apgovernmentchs.wikispaces.com)