My Federal tax in turbotax is asking if last year State refund is taxable. Did I file a standard or itemized deduction? Is it referring to my Federal returns?

Yes Did you itemize on your federal tax return?  If you did itemize,  you would have deducted State taxes paid in 2017.( if your state has income tax like most states)

I'd like to know why TurboTax can't figure this out automatically, since I used it to file my state taxes last year!