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We wrote the book on Free Cash.
Or rather, I worked with Nancy Marshall, a former Lincoln-Sudbury (L-S) School Committee colleague, to develop the first-ever (as far as anyone could tell) guidelines for L-S’s Stabilization Fund (like a municipal Cash Capital Fund) and Free Cash—known in regional school finance as the Excess & Deficiency (E&D) Fund. We recognized the need for a structured approach to managing these funds, ensuring financial stability while allowing for strategic investments.
In Real Leadership, Real Results #1, I showcased my work on L-S technology upgrades, the Solar Canopy, and the Girls’ Softball Field.
In Real Leadership, Real Results #2, I’m focusing on fiscal guidelines.
But what exactly is Free Cash in municipal finance, and why does it matter?
A Simple Analogy: Free Cash and Smart Spending
Imagine you go grocery shopping with $100 in your pocket. A successful trip means you buy everything you need and still have a few dollars left. An unsuccessful trip means you don’t have enough to cover your bill.
If you finish shopping with $30 to $50 left, you may have miscalculated what you needed—unless you hit a big sale. That extra cash is like municipal Free Cash—money left after all obligations are met.
Free Cash and Prudent Budgeting
Towns, like households, must budget responsibly. Running out of money can damage a town’s credit rating and financial reputation.
Over a fiscal year, towns sometimes save money due to retirements, cost efficiencies, or higher-than-expected revenues. These surplus funds become Free Cash, which fluctuates year to year. Despite these fluctuations, it is both prudent and beneficial for a town to generate a reasonable amount of Free Cash annually. This practice reflects sound financial management and fiscal responsibility.
Free Cash: One Part of a Strong Reserve Strategy
Free Cash is just one component of a responsible municipal reserve strategy. A well-managed town budget includes:
• Free Cash for flexibility but not recurring expenses.
• Stabilization Funds for economic downturns and long-term needs.
• Capital Reserves for infrastructure and major investments.
• Specialized Funds for pensions or contractual obligations.
A strong reserve strategy balances these elements to ensure long-term financial stability.
How Should Free Cash Be Used?
A responsible approach to Free Cash includes:
• Maintaining a reasonable balance. A 3% to 5% target provides financial flexibility without excessive accumulation.
• Allocating funds to reserves. Investing in Stabilization and Capital Funds supports future needs.
• Avoiding short-sighted spending. Free Cash should not be used for ongoing operational costs.
Reevaluating Sudbury’s Free Cash Policy
Sudbury’s current Free Cash policy sets a 3% to 5% target, but new Division of Local Services (DLS) guidance recommends 5% to 7%.
This shift highlights the need to regularly review financial policies to ensure they align with best practices. While Sudbury has followed responsible fiscal management, an assessment should determine whether an adjustment is needed.
Any policy revision should be data-driven, considering financial risks, stability, and long-term planning.
The Impact of Sound Budgeting
Sudbury’s Town Manager and Director of Finance have consistently prepared responsible budgets. But prudent budgeting is not just about maintaining the status quo—it requires continuous reassessment.
Similarly, when the L-S School Committee adopted the E&D (Free Cash) and Stabilization Funds guideline in 2018, it led to:
• L-S’s Stabilization Fund growing from $310,000 to $1.9 million.
• E&D reserves at healthy levels, ensuring financial flexibility.
• A guideline directing 25% of excess Free Cash into stabilization reserves.
Additionally, we established a clear process for using E&D in operating budgets sparingly, requiring approval from the Sudbury and Lincoln Select Boards to prevent unsustainable practices.
Why You Should Care About Free Cash
Put simply, Free Cash is part of a financial strategy that insulates all residents from economic turbulence. Some towns in Massachusetts have struggled with fiscal ups and downs since COVID, leading to painful budget cuts or costly overrides. Sudbury has remained stable, thanks in part to the Town staff’s efforts to build reserves and craft conservative budgets.
I understand municipal finance and will ensure Sudbury remains fiscally stable and future-ready.
Responsible budgeting requires strategic decisions, transparency, and long-term planning. Sudbury deserves financial policies that prioritize stability, accountability, and smart investments in our community.
The Work Doesn’t Stop Here
I have delivered real results for Sudbury—by listening, collaborating, and staying focused on what truly matters.
I’m ready to bring my commitment, experience, and work ethic to the Select Board.
If you believe in proven leadership, and a strong future for Sudbury, please vote for me. Vote for Radha Gargeya for Sudbury Select Board on Monday, March 31!