Regret after declining dream state job offer for lower counteroffer

I recently made a decision that I now deeply regret. After years of applying to my dream employer, a state government position that promised great work-life balance, pension, healthcare benefits, and student loan forgiveness, I finally received an offer. However, in a moment of panic fueled by imposter syndrome and personal issues, I accepted a counteroffer from my current employer instead. This counteroffer was lower than what my dream job offered, but I was worried about leaving my coworkers with my workload and burning bridges. Now, I feel trapped in my current role, which has a salary ceiling and is causing me significant anxiety and depression. I barely sleep three hours a night, and my job performance is suffering. I’m questioning whether I should abandon my career path and seek entry-level positions with the state or quit my job before I get fired. I'm also concerned about how this situation has damaged my reputation in a small industry where everyone knows each other. I feel lost and without direction, and I’m unsure of what my next steps should be.

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