A close friend of mine works for the Pennsylvania Healthcare Cost Containment Council in Harrisburg, PA. She is, of course, hearing many rumblings from the big wigs at the Capitol that funding is in danger, and the agency itself is on a short list of state programs being "evaluated." So to answer your question, yes, people still do work for state governments, but I can't say that it's as safe of a place to work as it used to be.