The National Rifle Association plugged a massive gap in its 2022 budget with tens of millions in debt.
However, even after tapping its line of credit to the tune of $23.6 million, the NRA still ran an $11.6 million deficit, according to an internal budget document obtained by The Reload. The substantial borrowing came despite the group’s 2022 budget anticipating paying down the same line of credit by $10 million. An apparently unexpected drop in membership revenue and jump in legal costs forced the gun-rights group further into debt.
The reliance on debt to plug a huge hole in the NRA’s budget may become more challenging to do as its revenues decline. Without a turnaround in the group’s membership woes, it can only forestall further cuts to core services for so long.
Rocky Marshall, a former NRA board member and critic of current leadership, claimed the group is already approaching the limit of what it can borrow. He argued the group is likely headed toward an untenable situation.
“This downward spiral is likely to accelerate as more members become disgusted with the corruption and misuse of donations by Wayne LaPierre, management staff, and the Board of Directors,” Marshall told The Reload.
Brian Mittendorf, an accounting professor at Ohio State University who studies the NRA, agreed the organization’s finances are in dire straights.
“Their financial performance and lack of other revenue sources have demonstrated how little margin for error their business model has,” he told The Reload. “The way things have developed, they run the risk of a downward spiral that is hard to reverse, a cycle that would result in the organization becoming a shell of its former self.”
The NRA did not respond to a request for comment.
Mittendorf said a line of credit can be an “effective means” for a group the size of the NRA to deal with “short-term cash fluctuations.” But it can also become an unsteady crutch when misused.
“If, instead, such short-term borrowing becomes a means of avoiding addressing more sustained cash shortfalls in their budget, something will give way quickly,” Mittendorf said. “Only so much can be borrowed before no more will be lent, and a revenue shortfall becomes an inability to pay bills.”
To that end, the NRA projects the group won’t use its line of credit at all in its 2023 budget. Instead, without explanation, it forecasts a 21 percent increase in membership revenue. Combined with a nearly $20 million assumed drop in legal costs, the NRA plans to break exactly even in pre-investment revenue and expenses.
But the NRA’s recent budget projections have missed by wide margins. If the group’s rosy predictions don’t come through in 2023, the group will once again be forced to plug the gaps in some way.
Still, Mittendorf said the NRA’s “membership base remains relatively strong.” He believes there is still time for the group to turn things around.
“Rather than a huge dropoff, they have seen more of a slow trickle of member revenue declines,” he said.
Marshall, on the other hand, thinks insolvency is becoming unavoidable.
“Most companies that eventually file bankruptcy are primarily driven by the cash flow of the operation,” he said. “The NRA will likely follow suit and be forced into bankruptcy in the coming months because the expenses are significantly outpacing the revenues.”
