Thank you everyone for your responses.
I went through the Q&A multiple times and do not see "My state doesn't tax all of this interest" or any other options. I ended up pulling up the NJ Interest worksheet and overriding the values. I manually split the total interest into agency and non-agency, and NJ form allows you to enter (Taxable vs Non-Taable on it) and it appears to be flowing through correctly. I do wish that 1099-Int would break out agency bonds as a separate category and wish there was an explicit entry in TT for the adjustment.
There was a typo in my original question above - while I am in no position to discuss what is and is not taxable, according to GiT5 FHLMC bonds are taxable in NJ while FHLB bonds and Federal Farm bonds are not.
https://www.nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf
