Highlands Community and Technical Schools filed for Chapter 11 bankruptcy Sunday, seeking federal court protection as it battles a $180 million state funding claim.
The Sacramento-area charter system, which serves thousands of adult students, filed in federal court this week after California State Auditor findings exposed a spending pattern that included nearly $2 million for a three-day San Diego Hyatt event, an $80,000 Maui conference, and a $2,600 Paris flight for an employee whose mother sat on the school’s board.
Jonathan Raymond, the school’s executive director, framed the filing as a defensive maneuver in a statement announcing the move. “Highlands is taking this step to protect our students and preserve the future of our schools,” he said. “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.”
The school has pledged to keep operating despite the bankruptcy, and is planning a rebrand. “The doors remain open. The lights remain on. Class remains in session,” Highlands said in its announcement.
State auditors delivered their report more than a year ago, finding Highlands had received over $180 million in K-12 funding for which it was not eligible. The audit identified $177 million in ineligible funding across 2022-23 and 2023-24, plus more than $5 million in overpayments tied to attendance calculation problems. Auditors said some attendance data lacked supporting documentation and was of “undetermined reliability.”
The auditor’s review classified the spending habits as “unlawful and wasteful spending of public funds.” Among the most scrutinized expenses was the $1.96 million August 2023 professional development event at Manchester Grand Hyatt San Diego, which Highlands defended as grant-funded training in an “innovative setting.”
The spending extended well beyond California borders. Highlands paid $80,000 to send seven employees and a consultant to an Independent Voter Project conference in Maui, claiming the attendees gathered legislative concerns to better support constituent needs. Auditors questioned whether this served a legitimate educational or professional development purpose.
The Paris trip drew particular scrutiny due to its family connection. The $2,600 flight sent an employee to a technology conference while the employee’s mother served on the Highlands board. The school maintained the trip aimed to promote its internal technology.
Perhaps the most unusual arrangement involved a professional baseball stadium listed among Highlands’ school sites. When auditors visited, they found no classes and no students present. The school later told officials it had terminated the lease but agreed to continue monthly payments exceeding $33,000 through April 2026, a deal that included VIP game tickets. The state auditor specifically flagged this stadium arrangement in its oversight concerns.
Smaller expenses also piled up. One employee stayed at the Hilton Waterfront Beach Resort in Huntington Beach for $1,900 during a conference in Long Beach, roughly 15 miles away, after Highlands claimed the on-site hotel was sold out. The school spent $137,900 on 6,000 beanies, scarves and gloves as holiday gifts for students, defending the purchases as engagement efforts. Another $8,750 bought holiday blankets from a vendor whose spouse was a director-level Highlands employee, which auditors classified as gifts of public funds.
Conflict-of-interest findings ran throughout the audit. A director-level employee initiated a $1,500-a-month contract with his wife for two months of mentor services, later telling auditors he was unaware the arrangement violated the law. One current executive director told auditors he believed an employee obtained a job at least partly because the employee’s mother sat on the board. Overall, auditors identified 11 employees who had at least one relative hired during their tenure.
The audit also uncovered widespread teacher-credential problems, a 51-to-1 student-teacher ratio, and a 2023-24 graduation rate of just 2.8%, compared with 86.4% statewide. About 200 employees donated roughly $101,000 to an affiliated foundation, with 109 survey respondents saying they felt pressured to contribute.
Additional questionable spending included $147,500 for an internal education game with unclear deliverables, a $60,000 student recruitment contract, and $25,860 in high school athletics sponsorship lacking evidence of promised marketing. Highlands also donated $50,000 to a legislative caucus foundation, saying it supported training and student outreach.
Highlands disputes the state’s findings and says it has overhauled its leadership, addressing 18 of 19 auditor recommendations. The school continues fighting the funding claims while operating its campuses under bankruptcy protection.