What to report if you have refund from one state, and owe tax in another state last year?

I know we must report last year's state tax refund as income on the federal return in some cases.  Last year I owed tax in one state, and received refund in another state (that's because I commute across state line).  Do I report: 

  1. just the refund, or
  2. the net refund (refund minus what I had to pay the other state)