You should still report the 1099-G. The IRS receives an electronic version of the same form you did.
And, look at it this way -- even though you didn't actually receive the refund, your spouse still got the benefit of it, by lowering his back child support.
Also, please see TurboTax FAQ "Do I need to report the state or local refund I got last year? Is it taxable?" below. It may not count as taxable income, anyway.
https://ttlc.intuit.com/replies/3300438
