If it is a pension from NYS or local governments and states exempt on the 1099-R, then you would mark the first option as shown in the picture I posted above. If you do not choose the correct option, then the NYS return will most likely default to only deducting up to $20,000 from the state tax return. This would create the difference in tax as you have described.
Per New York State, qualified pension benefits or distributions received by officers and employees of the United States, New York State, and local governments within New York State, are exempt from New York State, New York City, and Yonkers income taxes.
@PATM1957
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