Researcher Terry Moe holds forth on merit pay.  The column is behind the WSJ’s subscription firewall, but here’s an important excerpt:

But public schools, unlike most government organizations, do have a quantifiable bottom line — namely, student achievement, which can be measured quite reliably through standardized tests. Under NCLB and state accountability systems, students are already being tested regularly. It is a natural next step to connect the dots to teachers: measuring the learning that takes place in each classroom, and creating an incentive system that rewards teachers on that basis.

There are many ways to design such a system, and districts have a great deal of flexibility — about the portion of pay devoted to merit, about adjustments for student background, about how teachers of nonacademic subjects (like music and art) are to be evaluated, about the use of school-wide measures of performance (to encourage teamwork), and so on. It is a framework that is readily adapted to local circumstances and concerns. The idea is not to impose a "one best system," but simply to take reasonable steps, based on objective data, to see that good teachers are rewarded and mediocre ones aren’t.

I think points like these are going to be raised during NCLB reauthorization.  But as he also says, the devil is in the details.  Maybe the union will actually engage these points rather than try to dismiss them–because, as Moe says later in the article, merit pay is getting traction.