This issue has been reported to development. 

It looks like the local withholding is flowing to the IT-40 line 12 so the calculation should be correct on the state return. 

If this error on the 1099-G worksheet is the only error in the return you can attempt to disable the error checking to see if the return will go through. This article shows you how: 

https://accountants-community.intuit.com/articles/1606821-turning-off-disabling-conversion-error-che...