Florida may be nicknamed the Sunshine State, but for thousands of retired Connecticut state employees, it’s the “pension state”.
According to state records, Connecticut’s retirement system paid out $2.7 billion in pension checks in 2024, and nearly one in every four dollars — $677 million — went to retirees living outside Connecticut. Put another way, many of the people drawing from the system are the same ones escaping it — leaving state taxpayers to pick up the bill.
While most pension checks still land in Connecticut mailboxes, a large share of the state’s retirement spending now supports economies elsewhere. Florida leads the list, receiving about a quarter-billion dollars, followed by Massachusetts, South Carolina, North Carolina, and New York. Other top destinations include Georgia, Maine, New Hampshire, Virginia, and Rhode Island.
In total, roughly 25 percent of Connecticut’s pension spending leaves the state each year — supporting restaurants, housing markets, and tax revenues far from home.
The Legacy Burden
Connecticut’s earliest pension tiers, created before the 1990s, still drive much of the cost. Tier I plans feature the most favorable formulas and earliest retirement ages, producing higher average payouts than later tiers. Even with more moderate formulas for newer employees, total costs continue to rise.
Today the state spends about one-quarter of its entire state budget — roughly $6 billion a year — on retired state employees, the highest share in the nation. Reforms have slowed the bleeding, but the system still grows faster than taxpayers can fund it.
A Pension System That Exports Wealth
When pension payments flow out of state, Connecticut loses more than residents — it loses local economic activity that keeps Main Streets alive. Each check drawn from Connecticut’s treasury and cashed elsewhere represents dollars not circulating through local businesses, property markets, and tax receipts. As more retirees relocate, fewer pension dollars remain to support the communities that fund the system.
Coincidentally, pension recipients fleeing Connecticut’s high cost of living are fleeing the very system that created it. According to The Pew Charitable Trusts, the state’s unfunded pension obligations totaled $40.6 billion in 2022, equal to 148 percent of annual revenue, ranking fourth-highest in the nation. By mid-2025, the Lamont administration estimated that unfunded pension liabilities had declined to $35.1 billion, thanks to nearly $8.6 billion in supplemental deposits made possible by the state’s fiscal guardrails.
Despite that progress, Connecticut still faces one of the largest pension burdens in America, with more than $61.8 billion in combined unfunded obligations for pensions and retiree health care — leaving each taxpayer effectively $44,500 in the red, according to Truth in Accounting.
The Cost of Growing Old in Connecticut
It’s easy to see why so many retirees head south. Independent analyses consistently rank Connecticut near the bottom among U.S. states for retirement affordability. Retirement Living’s 2025 Best and Worst States to Retire placed Connecticut 44th overall citing high property taxes, a steep cost of living, and a heavy income-tax burden.
Florida, by contrast, ranked third-best, offering lower taxes and warmer weather, a combination that helps explain why its the top destination for Connecticut pension checks.
Together, the rankings highlight a simple pattern: the same tax policies that make it difficult for working families to stay in Connecticut, also drive retirees. The result is Connecticut pension checks are being cashed by the same people who find it too costly to spend those checks here.
The Tax Line Connecticut Can’t Cross
Some might wonder whether Connecticut could recoup lost revenue by taxing pension income paid to out-of-state retirees. Federal law prohibits it.
Under 4 U.S.C. § 114, enacted by Congress in 1996, states are prohibited from taxing “retirement income” received by nonresidents, including public pensions, IRAs, and deferred-compensation plans. The law was designed to prevent states from reaching across borders to tax former residents after they retire.
The Policy Trap: Spending More to Fix Overspending
Even with recent progress in paying down pension debt, Connecticut’s long-term fiscal outlook remains precarious. The state has made meaningful strides through its fiscal guardrails, yet calls for new spending and higher taxes persist.
Some union coalitions, including the State Employees Bargaining Agent Coalition (SEBAC), continue to advocate for increased revenue through higher tax rates on high earners and new spending commitments tied to collective bargaining agreements. While these proposals reflect legitimate efforts to strengthen public services and worker security, they risk undermining the fiscal discipline that made recent progress possible.
The challenge is structural, not ideological. Each additional revenue increase aimed at covering long-term obligations may provide short-term relief, but it also accelerates the outmigration of working-age residents and businesses that sustain Connecticut’s tax base. When that base shrinks, the burden shifts further onto those who remain.
Connecticut cannot tax its way back to solvency any more than it can spend its way to affordability. Sustainable reform requires balancing obligations to retirees with policies that keep the state economically competitive and livable for future generations.
That means maintaining the guardrails that have reduced pension debt, aligning public-sector benefits more closely with private- and municipal-sector norms, and resisting the temptation to reopen settled fiscal debates for short-term political gain.
Connecticut’s progress proves that disciplined, data-driven budgeting works. Preserving that progress — and ensuring the state’s financial future — depends on staying the course, not reversing it.
