Are US Government interest and gain in an IRA account paid out in an RMD distribution subject to State income tax?

Yes.  All distributions from a traditional IRA are taxable as ordinary income.  This can be a good reason not to hold in a traditional IRA (or any other kind of qualified retirement account) investments that produce significant amount of otherwise nontaxable income.  Doing so causes the otherwise nontaxable income to become taxable income.