Y'know, seeing as there are only two branches to take, it can be simplified somewhat:
$states = array(
"Alabama",
"Arkansas",
"Florida",
"Illinois",
"Massachusetts",
"Mississippi",
"Montana",
"Nebraska",
"North Dakota",
"South Carolina",
"Tennessee",
"Texas",
"Virginia",
"Wisconsin");
if(in_array($lead->state, $states))
{
$template->set_var('STATE', '<span style="color:#FF0000">' . $lead->state . '</span>'); //$lead->state
}
else
{
$template->set_var('STATE', $lead->state);
}
And it's probably possible (depending on your application's architecture) to put the array somewhere that it can be used in other situations as well (presumably there is a reason why you want those particular states highlighted, hence there must be somewhere else where the same list is applicable).
PS: You don't mind if I correct the spelling of "Massachusetts", do you?