From “Funky” by Peter Tamony in American Speech 55, no. 3 (autumn 1980):
Perhaps the earliest definition of funky is recorded in a brief glossary inTime’s cover article on Dave Brubeck (8 Nov. 1954): “Funky, adj. Authentic, swinging.” A week later, Walter Winchell strictured, “Timemag goofed with its jazz glossary. Said ‘Funky’ means authentic swing. Real hipsters say it means old-time rickety jazz” (San Francisco Call-Bulletin, 15 Nov. 1954). Obviously, the downhome connotation was being extended by a rebirth of feeling in jazz. The celebrated Bix Beiderbecke was said to have been funky because of his careless personal habits. “It was not just a joke that jazz clubs have been and are called ‘toilets.’” So the adjective was transferred to the rawness, the earthiness of blues played in closely packed, often unventilated, seven-day-sock joints with clogged plumbing, in which most black and white jazzmen have been sentenced to employment.