I've asked about a million people about this (okay not THAT many.......but still)
Hilton tells me that state govt rates are for YOUR state only. (so I'm in FL, only FL state employees can use it) My Central Reservations line says both - yes and no. Depends on who you ask.
It's really annoying, I'd love for them to all decide together and just stick to it. I try to stay within FL state employees, but let's face it - it doesn't always happen that way. No one at my desk has ever "gotten onto" a guest for misusing discounts. At most, we simply explain how it's supposed to be used, and let them be on their way - discount and all.
I'm wondering if somewhere along the way, that hotel got busted for giving out govt. discounts to people it didn't apply to. Even so, it's not a good excuse for the way they behaved. What you did is very common and shouldn't have been responded to like that.
I think the biggest thing I get, that I CAN'T give into, is when people stay tax exempt, but bring me an out of state certificate. For some reason it's always so hard to explain to them why I can't accept it. But that's a whole new issue.