Highlands charter schools file for federal bankruptcy amid $186M dispute

The financial picture for Highlands Community Charter and Technical Schools deepened Sunday as it filed for Chapter 11 bankruptcy, amid a dispute over a state audit finding and uncertainty about whether its schools can continue operating under their current charters.

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The bankruptcy filing comes months after the Sacramento County Board of Education overturned Twin Rivers Unified’s decision to revoke the charters, and the district appealed that ruling to the California State Board of Education.

“The reorganization process gives us the best opportunity to remain open and continue serving students while we address the disputed financial claims through an orderly, court-supervised process,” Jonathan Raymond, executive director of the charter school said in a statement on Monday.

“The California State Auditor has now marked all 18 recommendations directed to Highlands as fully implemented. That progress matters, and we remain committed to the reforms that are moving Highlands forward,” Raymond said.

Unlike Chapter 7, Chapter 11 bankruptcy generally allows businesses to continue operating while they figure out a plan to address their debts.

The dispute stems from a 2025 state audit that found the charter schools received about $186 million in funding for which they were ineligible and cited wasteful spending and improper hiring practices. Some of the spending included about $2 million for employee trips to San Diego, $80,000 for a trip to Maui and $2,600 for a trip to France.

In the filing, the organization said it needs time for the dispute to run its course and pursue a new charter in Sutter County. If approved, Highlands said it hopes to transfer its programs, students and employees there by July 2027.

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Sutter County to decide on new charter

Highlands has been pursuing a new charter outside Sacramento County, and the Sutter County Board of Education is scheduled to decide in December whether to approve it. When asked whether Highlands would seek to reduce or discharge the disputed state claim or negotiate a settlement, Andrew Acosta, a spokesperson for the schools, did not answer directly and referred to Raymond’s statement.

But the outcome in Sutter County appears separate from the debt dispute. In September, California Department of Education spokesperson Scott Roark said closing Highlands in Twin Rivers Unified would not eliminate its debts, including what is owed to the state.

Disputing state’s audit

Highlands also continues to challenge the state audit’s findings in a separate appeal, according to the filing, arguing that Twin Rivers Unified and other oversight agencies failed to adequately monitor the schools and contributed to the problems identified in the audit.

The state education department declined to comment Monday, while noting that it is aware that Highlands had filed for bankruptcy.

Federal law requires the bankruptcy court to hold a hearing before approving a reorganization plan.

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This story was originally published October 5, 2026 at 4:01 PM.