I live in the SF Bay Area and Funk is still going strong. Or, to be more precise, there are a plethora of bands out there 'faking the funk' and a few that are the real deal.
However, considering this is the city that spawned the Dead, the groove/jam scene is surprisingly weak. I know of a handful of jambands and they all seem to play at about the same two or three clubs.
My main gig right now is an indie band and there's a relatively small, close-knit scene centered in the Mission. No one's getting rich, but most of the good bands work regularly.