Thanks for the pointers.
I found out the state and local income tax worksheet in the turbotax form mode and found out the taxable 1099-G entry for prior years. The column d showed the same amount as column c. Changing the column d to zero did the trick.
Since (I think) the worksheet does not get filed along with the returns, technically I am doing exactly the same thing as you suggested above. So marking your answer as the best one.
For years, I blindly followed turbotax and let it do what it wanted to but now I am discovering that I should be at least paying attention to how the tax due/tax refund amount changes at the top whenever I change numbers.
