California sent you a 1099-G because you still received a state tax refund. Instead of receiving the refund, you applied to towards your 2020 taxes.
It's the same as if a bank paid you $10 in interest and you kept it in your account instead of withdrawing the money. You still have $10 more than you started with.
If you itemized deductions and claimed a deduction for state and local taxes then you should enter Form 1099-G into TurboTax. It may be taxable.
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