Actually it IS a state. The older states love to keep the older terms though. For example, in NJ, in colonial and early independence periods, only landowners who held their land free of any encumbrance could vote. Such people were called freeholders.
Most counties in NJ (a couple have modernized) are run by a government called the Board of Chosen Freeholders, an archaic term that dates to when only freeholders could vote. Even though that's long gone, the name remains - in fact, many in NJ don't know the origin of the name of the governing body and refer to the Board as the "Freeholders". (It gets even more confusing in Monmouth County NJ, where the seat of the Board of Chosen Freeholders is in a borough called "Freehold", better known for Bruce Springsteen.)