It turns out the solution was simple, but frustrating. To do refactoring in VS Code (at least for python) you need to be in a workspace.
I solved the problem by first closing the open folder I was in:
File > Close Folder.
then navigating to a sub folder of .py file I was editing, and opening it. In my case it was
- Click the little document icon in the upper left of screen
- In the welcome screen, choose “open folder”
- navigate to my desktop folder (where my .py file is)
Now refactoring works as expected
Click on file icon in upper left of screen > in the welcome screen