Statics are still hidden global state, and those can be problematic regardless of being function local or module global. Having global state like this affects testability and can affect threading as well.
I think this is a very good point. I'm no expert, but I know a HUGE amount of old C code isn't thread-safe -- and static has something to do with that?
Not that people shouldn't be allowed to write non thread-safe code in Python, but it shouldn't be encouraged. An awful lot of code is written with no idea that it will be run in multi-threaded code later on.
Personally, I can't think of any times when I would have used this -- maybe because it wasn't there, so I didn't think about it.