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...
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