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Why did you get the 1099G? It could be for unemployment or a state refund you got or something else.
A State Tax Refund in box 2 is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.
It is asking about last year's state tax refund - it would have been reported on a 1099-G. See the link below - your state refund is not taxable if you took the standard deduction last year. So, unless you itemized, you can skip that section.
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