You are correct that New York does not tax employee pensions from the federal government.
After you enter your 1099-R, you 'll see a screen Where is this distribution from? Check that it is from the NY Government. See the screenshot below. That will result in your state retirement benefit being exempt from NY state tax.
If you look at your Form IT-201, you will see that the full pension shows on line 10, and the full subtraction of the pension shows on line 26, because NY doesn't tax government pensions.
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