The problem you're having is that you're essentially creating conflicting lookups by trying to make the lookup responsible for the default value.

The suggestions will go away when a value is entered into the field as a side effect of the filtering (i.e., when you start typing it narrows the list, so the options will all be gone if you enter an exact match or nothing matches the field value). If you want the other options to always be listed it is better to use a dropdown.

As for defaulting, you could set a change event trigger on the Fund Category field, but you have to do it a specific way since this is a table.

First, add a CSS class to your table; this will be used to monitor change events for the entire table and filter out the ones you want to react to, which is really the best option for tables with dynamic rows.

Next, add CSS classes to the two fields; the first will allow you to detect changes to the fund category, and the second will allow you to update the corresponding cost center to a default value.

$(document).ready(function(){
  // detect change events in the table
  // filtering applied to only react to fund category changes
  $('.myTable').on('change','.fundCategory :input',function(){
    // check the field value
    if($(this).val() == 'Employer'){
      // update cost center for the same row
      $(this).parents('tr').find('.costCenter :input').val('1000').change();
    }
  });
});

I used :input in the example because it is dynamic, meaning it will work regardless of whether you use single line fields or dropdowns.