Are pensions taxed in hawaii? Why is my wife's pension not excluded?

This is not correct. Employer funded retirement is not taxable.
Nontaxable Distributions
The following lines describe what qualifying
distributions are. These qualifying distributions
were included in your federal AGI and
will be excluded on this line. For a distribution
to qualify, it must be paid by a pension plan by
reason of retirement, disability, or death. The
pension plan does not have to be a “qualified
plan” as defined in section 401 of the Internal
Revenue Code.
 Employer-Funded Pension Plans
The following three types of distributions
are not taxed by Hawaii and should be included
on line 13:
(1) Pension or annuity distributions from a
public (i.e., government) retirement system
(e.g., federal civil service annuity, military
pension, state or county retirement system).
(2) Distributions from a private employer
pension plan received upon retirement (including
early retirement and disability retirement)
if the employee did not contribute to the
pension plan.
(3) Distributions from a pension plan at
age 70-1/2 that are made to comply with the
federal mandatory payout rule do qualify as
a retirement payment whether or not the employee
is still working full time.
Distributions from a private employer pension
plan received upon retirement are partially
taxed by Hawaii if the employee contributed
to the pension plan.