You were right until this past year. They decided to exclude campuses considered to be at capacity...KHS was the only HS listed. Had he been a freshman last year, they would have allowed him to complete the highest grade on that campus, in his case that would have meant he could graduate from KHS. But since he hadn't started on that campus yet and KHS was full, he became a casualty.
He was bummed at first, but he is adjusting and NHS has a new baseball coach, so he feels better about it now.