http://c2.com/cgi/wiki?GlobalVariablesAreBad
State, in general, at any scope, can make things difficult no doubt. But global state is classically bad because it's hard to reason about across large chunks of distributed code, pollutes namespaces, creates concurrency nightmares, etc. Reducing the scope of state to a manageable range of, say, less than a dozen lines of code, into short-lived references, is clearly far better than the alternative and a reasonable approach in the vast majority of cases. Calling it 'poison' ratchets the rhetoric way beyond the gravity of the problem. No, local state is not considered harmful.
What it seems OP is really talking about in practical terms is pure stateless programming, where the application has no implicit or explicit references to a value whose authoritative data resolves in main memory. If you were to tell me the only state you have in your application is Filesystem or database data, "just beyond the edges of our program logic," I'd say you'd basically achieved the fabled 'stateless' programming ideal, long held as a kind of Holy Grail of functional application development, and as OP points out, that's not often achieved even in the strictest functional environments.
I don't want to diminish the points made, the article was instructive to me as yet another anecdote about the perils of shared mutable state at any scope. But the fundamental principle, that one should avoid shared mutable state as much as possible -- which is the upshot of the essay -- has been axiomatic for quite some time.