Hierarchical taxonomy confusion

I'm having trouble creating the hierarchy of my custom taxonomies the way I want them.

Let's say I want 2 taxonomies - city and state. I tell CustomPress they are hierarchical, but I don't understand how to designate state as the parent of city.

I created one taxonomy called state, one called city. I marked both as hierarchical.

I added some states and marked the parent drop-down as 'none.' So far so good.

When I add cities though, I can't select a state as their parent. My only options are 'none' and the other cities I've added.

I'm sure I'm missing something really basic, just don't know what it is.
thanks
Scott