Why is my 2020 state refund be counted as income for 2021? I did not itemize in 2020.

If you did not itemize for 2020 then your 2020 state refund is not counted as income and you do not have to enter it.

If you are looking at the TT Income Summary, it lists just the gross figures and is only FYI.  Your state tax refund may benefit you in calculating the Sales Tax deduction if you are itemizing for Federal.