No they didn’t—from TFA:
When the poster contest was originally formed in 2024, the use of AI was permitted if explained as a part of the application process.
Since current US legal decisions indicate that genAI works are not copyrightable, this is troublesome for any organization that wants exclusive licensing for publicity. The State Fair would expect to incorporate their art winners into marketing, posters, and expect to strike down derivative works and other commercial uses.
Not to mention that any Ai-entrant piece could be duplicated by any other entrant.