The function name written in the on change event must be equal to the function written in the java script so that when the event fire it will go to that function written in the java script file.
<asp:dropdownlist id="ddlState" runat="server" cssclass="input2" style="width:196px" onchange="setState(this,district)" xmlns:asp="#unknown">
<asp:listitem value="" selected="True">Select State</asp:listitem>
</asp:dropdownlist>