Highlands Community Charter and Technical Schools asked the bankruptcy court on October 13, 2026, to halt a charter-revocation appeal that it says threatens its ability to keep operating. The nonprofit seeks a declaration that the automatic stay applies or, alternatively, an injunction protecting its charters. Its complaint warns that an adverse decision at a scheduled November 12 State Board of Education meeting could lead to loss of funding and closure. These are Highlands’ allegations and requests for relief. Stay motion, pp. 2–3; complaint, pp. 9, 13
The intended restructuring would give Highlands time to obtain a new charter authorizer and address approximately $186 million in disputed audit liability. Separately, an October 15 order authorizes interim use of operating cash under a budget, while reserving proposed state overpayment-recovery terms for final consideration. First-day declaration, pp. 3–4; interim cash-use order, pp. 3–4
This account uses court filings dated October 4–15, 2026.
Highlands operates two adult-serving charter schools in Sacramento County: Highlands Community Charter School and California Innovative Career Academy. Executive Director Jonathan Raymond’s first-day declaration reported 1,260 students at the former, 655 at the latter, and 167 employees across the schools at filing. Twin Rivers Unified School District issued their current charters. First-day declaration, pp. 4–5
According to Highlands’ complaint, the Twin Rivers board voted to revoke the charters in January 2026. The Sacramento County Board of Education overturned that decision on May 19, and Twin Rivers appealed to the State Board of Education on June 18. Highlands says the state’s Advisory Commission on Charter Schools subsequently recommended upholding revocation, with the State Board scheduled to consider the matter on November 12. Complaint, pp. 8–9
Highlands’ adversary proceeding names the Twin Rivers board and the State Board as defendants. It argues that revocation efforts implicate estate property, including the charters and funding. Its supporting memorandum also addresses the police and regulatory power exception to the automatic stay, arguing that revocation serves no valid regulatory purpose under the circumstances. Alternatively, Highlands asks for an injunction under Bankruptcy Code section 105(a). Those arguments remain the debtor’s position, rather than findings establishing the scope of bankruptcy protection. Complaint, p. 1; stay motion, p. 2; supporting memorandum, pp. 20–22, 25
The audit claim is separate from attendance-related overpayments
The approximately $186 million audit liability is disputed and unliquidated, according to Raymond’s cash-use declaration. Highlands’ complaint says the California Department of Education issued repayment determinations following a June 2025 state audit and that the schools appealed those determinations to the Education Audit Appeals Panel. The complaint further reports that the Department of Finance did not object to staying the audit appeal, while reserving its right to seek relief from the bankruptcy stay. Highlands therefore did not seek relief concerning the audit appeal in this complaint. Cash-use declaration, p. 4; complaint, pp. 7–8
A separate set of state overpayment claims arises from attendance-based funding. Raymond explains that initial funding relied on the prior year’s higher attendance, while enrollment declined in the 2025–26 school year. His declaration reports a $30,820,947 demand against Highlands Community Charter School and a separate state claim of approximately $22,404,357 against California Innovative Career Academy. Cash-use declaration, p. 5
Highlands disputes the academy’s amount. Raymond says the state treated its entire funding amount as an overpayment because the academy lacked a required funding determination. The academy estimates its actual overpayment would be approximately $12.2 million if it received that determination, but the declaration expressly says the ultimate amount is unknown. The estimate should therefore remain distinct from both the state’s claim and the audit liability. Cash-use declaration, p. 6
Interim cash authority comes with spending limits
Raymond reported approximately $93.6 million in cash and cash equivalents at filing, including approximately $51.8 million restricted to designated grant and program purposes. The declaration identifies the remaining unrestricted cash as the primary source for general operating expenses. It also reports no funded debt, bonds, notes, or credit facilities, while identifying certain equipment leases as secured obligations. Cash-use declaration, p. 4
The October 15 interim order permits Highlands to use existing and incoming cash for operations and case administration under the approved budget. Restricted funds must retain their designated uses and separate accounting. Material budget changes require another court order, subject to a limited allowance for cumulative monthly line-item variances of up to 10% with advance notice. Highlands must also attach budget-to-actual comparisons to its monthly operating reports. Interim cash-use order, p. 3
The same order expressly reserves the proposed state overpayment-recovery terms for final consideration. Any remaining overpayment claims at the end of the 2026–27 school year remain subject to the state’s reserved rights and Highlands’ ability to contest them. The final cash-use hearing is scheduled for November 10, 2026, at 11 a.m. Pacific time. Interim cash-use order, pp. 3–4
Who is the claims agent?
The court approved Kurtzman Carson Consultants, LLC, doing business as Verita Global, as Highlands’ notice, claims, and solicitation agent in an October 12 order, effective as of the petition date. Verita is authorized to administer proofs of claim and maintain the official claims register. Retention order, pp. 1–3
The proposed exit depends on a new authorizer
Highlands’ complaint identifies the Sutter County Board of Education as the prospective new authorizer, with a decision anticipated in December 2026 for charters beginning in the 2027–28 academic year. Raymond’s first-day declaration describes a conditional plan: if a new authorizer approves the charters, Highlands intends to file a Chapter 11 plan implementing the transfer of schools and students under those charters effective July 1, 2027. Complaint, p. 11; first-day declaration, p. 3
The stay-motion hearing is scheduled for November 10, two days before the State Board meeting described in Highlands’ complaint. The immediate unresolved issue is whether Highlands can obtain protection for its existing charters long enough to pursue that conditional restructuring. Hearing notice, p. 2; complaint, pp. 9, 11
Sources
Stay motion, pp. 2–3 /documents/236af9df-774a-4324-bc6c-9402618b661f/
complaint, pp. 9, 13 /documents/6e35db57-3cda-4296-a499-b721ded4fe08/
First-day declaration, pp. 3–4 /documents/1e20e9cf-4531-4b13-99c9-4f1e7f4bf361/
interim cash-use order, pp. 3–4 /documents/02bce0f3-8039-4bed-b06f-d65853cd3998/
supporting memorandum, pp. 20–22, 25 /documents/2dd325de-4cd7-4f1e-b6c8-3c7131b654ed/
Cash-use declaration, p. 4 /documents/838e4d6c-00bb-42a5-a58a-e1a653d46af8/
Retention order, pp. 1–3 /documents/8669a6bc-a184-44f3-9742-4e017f6f7fc3/
Hearing notice, p. 2 /documents/ab8ec6b1-bd2a-4358-bdd3-8cadeb5be4b1/
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.