I searched online that ibond interest is not taxable for state and local but when I use turbotax, how come my state income did not exclude ibond interests?

U.S. Treasury interest must be entered in box 3 at the 1099-INT screen, in the federal section of the program.  When it is entered there, TT will automatically make the deduction on the state return. There is no other way to make the adjustment. 

Be sure that the US Treasury Interest in entered in box 3, at the 1099-INT screen.  When you first see that screen, check the box "my 1099-Int has more than just a box 1", to get access to box 3.