I would seriously doubt this assumption. Why on earth should someone living in a state specifically ask for the local time in a different location within that same state?
On the contrary, this context information would make it much more likely that the person actually meant "London, England". Except if there is a timezone border going through the state, of course.
However, I obviously agree with your general point regarding the severe limitations of what we currently call "AI" and how little "intelligence" there actually is.