...it ain't ONLY used to refer to gay folk from Austin.
Having attended "that little school" in Austin for 4 years, I can say that I never once heard the "steers and queers" phrase used to refer to gay people attending UT. Heard it from outsiders talking about people IN Texas (the state in general), from Longhorns referring to people who attend the other "little school" in College Station (and, of course, vice versa), and from Texas referring to Oklahomans, as Bill stated.
But AFAIK, it's not solely (or even mainly) used to refer to gays in Austin.