The state refund being listed on the income input screen merely means that you entered it. If TurboTax determined, based on the information you provided, that the refund is not taxable, it will not appear on your Form 1040.
The state income tax refund that you received in 2016 is not taxable unless you claimed an itemized deduction for state income tax on your federal tax return for the year that the state refund is for, and your received a tax benefit from that itemized deduction, i.e. it actually reduced your federal tax.
