Your state tax refund shows as income because it is considered income.
On the income summary screen of TurboTax, all items are listed for reference, whether or not they are taxable.
Since you took the standard deduction, yours isn't considered taxable income, which is why (as you pointed out) you see the further notation "Good news! Your state tax refund is not taxable."
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"