Heffley's legislation - is it needed, and what has happened in the Hazleton Area School District

Summary of the situation

In Pennsylvania, allocation of school taxes for multi-county school districts is administered by two state agencies, Pennsylvania Department of Education (PDE) and State Tax Equalization Board (STEB). Tax allocation process, as implemented by the agencies, violates multiple governing statutory provisions, resulting in material inequalities as well as in instabilities. In our opinion, the current statutory provisions are adequate, and the way to fix the issues is not to adopt new legislation but to enforce compliance with the existing law.

One of the violated statutory provisions is the requirement in the section 672.1(a)(1) of the School Code that tax allocation must be based on the valuation of the same properties as the properties being taxed.

To illustrate, let's consider a two-county school district in which all the properties are assessed at 100% of their market values, and the prices are stable for many years. There are ten houses in the school district, of which five are in County1 and the other five in County2. Each house has $100,000 assessed value and $100,000 market value. Two houses in County1 were build and added to the tax roll in Feb. 2024, while the remaining eight houses in the school district all predate 2020. Assume that the school budget is $8,000 annually.

The 2024-25 tax year started July 1, 2024 and ended June 30, 2025. With the $8,000 school budget and ten equally valued houses, it is natural to expect each house in the school district to have a $800 tax bill. However, that's not the case. The five County1 houses would be charged $600 each, while the five County2 houses would be charged $1,000 each.

Annual STEB Market Value reports for the hypothetical school district would look as follows.

PDE allocates taxes for the 2024-25 tax year based on the Market Values in the 2022 STEB report. That's because at the time of the allocation, in early June, 2024, the 2022 STEB report is the latest available report. The 2023 report would not be published until late June, while the 2024 report would be published in late June, 2025.

The tax calculations take the 2022 STEB Market Value report, in which County1 real estate values total $300,000, and County2 real estate values total $500,000. Since the total budget is $8,000, County1 gets $3,000 allocated to it, while County2 gets $5,000. Since the actual County1 market and assessed values are $500,000, not $300,000, determination of its tax rate (Millage) by dividing the allocated $3,000 among five houses results in improperly low 0.6% tax rate, or $600 tax bill for each house.

The problem, therefore, is that Line c. and Line d. in the table below do not represent the same properties, which violates the law.

Comparison of the assessed value from the STEB report used for tax allocation to the actual assessed values of County1 in the hypothetical school district shows that they remain materially different for two years. Then, in the 2026-27 year, the disparity disappears.

As a result, for two years, 2024-25 and 2025-26, Carbon County taxpayers were significantly under-taxed. For them, the Millage dropped under 3%, and for 2025-26, the tax burden dropped to 0.50%, or 50 cents on $100 of market value.

By tax burden, we mean the tax rate to which a taxpayer is legally entitled.

For 2025-26, each property owner in the Carbon County portion of the Hazleton Area School District had a legal right to pay no more than 0.50% of the property's market value in school tax. Anyone paying more than that, could have reduced the tax bill to 0.50% of the current market value by filing property tax appeal. On appeal, the market value of the property would have been determined, then divided by the 5.58 Common Level Ratio Factor to produce the assessed value. The assessed value, in turn, would have been multiplied by 2.809% to produce the tax bill. The tax bill, therefore, would have been reduced to 2.809% / 5.58 = 0.50% of the market value.

Properties paying less than 0.50% could have been subject to assessment appeal by the school district, with the same outcome - tax bill equal to 0.50% of the property's market value.

The jump in Carbon County tax rate between 2025-26 and 2026-27 has prompted Rep. Doyle Heffley to propose legislation limiting tax increases. Apparently, it was not taken into account that the jump might be due to the prior year's tax being too low. In 2025-26, Carbon County taxpayers were paying next to nothing. Limiting the tax increases would mean that they continue paying next to nothing, not a desirable result.

The above table shows the details of the actual tax calculations and the calculations as they should have been performed. In the correct calculations, Line c is not from the old STEB Market Value report, but the Computed Value, as defined in the Pennsylvania Tax Code. Computed Value = Assessed Value times Common Level Ratio Factor.

Under the correct calculations, the allocation of taxes is based on the valuation of the same properties as the properties subject to taxation. Tax burden is the same for all three portions of the school district. In addition, as the below table demonstrates, tax burden is stable year over year.

The current use of STEB Market Value report substantially contributes to the inequality of taxation. STEB operations do not employ acceptable statistical methods and are prone to mistakes. The numbers in the STEB Market Value report are incorrect to the degree of being unrealistic.

Consider, for example, Schuykill County. In 2024, the county performed re-assessment. In the spring of 2025, Schuykill County informed its property owners about the completion of the re-assessment process, and that the new assessments are equal to the property values as of January 1, 2025. According to Line d in the 2026-27 calculations, these values add up to $1,031 million. At the same time, the corresponding valuations from the STEB Market Value reports, as diplayed in Line c, are $467 million in the 2025-26 calculations and $559 million in the 2026-27 calculations. That's about half of the true value. STEB Market Values are therefore off by a lot.

By comparison, the correct 2026-27 tax allocation has the same $1,031 million value in Line c and in Line d.

An additional irregularity is the false impression of declining real estate prices in Luzerne County, as represented by the Common Level Ratio, created by the manipulation of the real estate sales reported by the county. Starting 2023, the county is declaring the majority of the sales with low assessment / price ratio to be invalid.

In reality, the prices are going up, and the number of real estate sales with high assessment / price ratio is declining. In the table below, the number of sales with the ratios in the 100% - 150% range is steadily declining, with about half of the sales identified as valid.

Naturally, the number of real estate sales with high assessment / price ratio is steadily increasing. To create an impression of declining prices, ever higher number of these sales is declared invalid. The table below summarizes the sales with the ratios between 20% and 50%.

Table 9. Manipulation of the sales data: low ratios.

Luzerne County Real Estate Sales - Ratio range 20% to 50%
Code	Description	2025	2024	2023	2022	2021
00	Valid Sale	8	11	24	854	414
01	No Assessed Valuation	8	2	0	8	14
02	Family Transfer	6	9	15	11	14
03	Corporate Affiliations / Acquisitions	97	211	173	69	213
04	Government / Public Utility	5	0	0	0	3
05	Charitable or other Tax Exempt Agencies	9	6	6	2	4
06	Financial Institutions	6	1	4	0	3
07	Part Interest	3	3	1	0	0
08	Forced / Sheriff	4	5	4	3	2
09	Multiple-Parcel	399	362	411	464	329
10	Estate Sale	48	58	60	52	35
11	Land Contract	0	0	0	0	0
12	Auction	0	0	0	0	0
13	Date of Transfer	1	0	0	0	0
14	Time on Market	0	0	3	0	0
15	Corporate Relocation Company	0	0	1	0	0
16	Sale of Doubtful Title	13	7	6	4	0
17	Lease Purchase / Leaseback	0	0	0	0	0
18	Partial Assessment	529	514	696	53	0
19	Equipment / Personal Property	5	0	20	2	1
20	Special of Preferred Assessments	0	0	0	0	0
21	Duplicate Sale / Deed of Correction	2	4	5	4	3
22	Other (Needs Explanation)	1,133	788	185	49	65
23	Sale from Repository	3	0	1	0	0
49/50	Clean and Green Sales	2	0	0	6	3
Total		2,281	1,981	1,615	1,581	1,103

In 2025, just 8 of these sales are valid. On the other hand, 1,133 sales are invalid for reasons not falling in any of the standard categories and requiring an explanation.

To illustrate how unreasonable the 2025 rejections are, let's compare the treatment of the residential properties that had been sold both in 2022 and in 2025, had the same assessed value both in 2022 and in 2025, and for which the 2025 sales price was close to the 2022 sales price.

Even though the assessed values of the above properties have not changed, and the 2025 resale values were little changed from the 2002 sales price, all the 2022 sales were marked as valid, while all the 2025 sales were marked as invalid.

Importantly, rejection with code "22" "requires explanation why the appraiser feels the sale should be invalid. According to STEB procedural manual, a "sale should not be rejected as invalid unless a specific reason to do so is identified." However, the thousands of the "22" rejection were submitted to STEB without accompanying explanations, with STEB nevertheless treating these sales as invalid.

Out of 696 sales rejected in 2023 with code "18" (Partial Assessment), 81 properties were re-sold in 2025. For three of these properties, the assessed value has changed between the sales. For the remaining 78 properties, the assessed value was the same as at the time of the 2023 sale. Therefore, the 2023 sale could not have possibly been associated with the partial assessment. For at least 78 out of 81 re-sold properties, the 2023 rejection was therefore improper.