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 The 2023 report would not be published until late June, while the 2024 report would be published in late June, 2025.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.