In his recent State of the State address, the Governator joined forces with a select group of his peers by proposing the hotly-contested concept of merit pay for California teachers. While no details were available to explain the two-line bombshell, Schwarzenegger's remarks immediately invoked the wrath of unions, made worse by his concurrent announcement of a $2 billion cut in public schools funding.

Schwarzenegger didn't dance around this issue, stating with his customary frankness "…I propose that teacher employment be tied to performance, not to just showing up." If 'showing up' is a harsh way to frame this polarizing issue, so be it. No one familiar with the operations of schools, especially schools that have a difficult time attracting teachers, can pretend that a significant percentage of teachers don't unfairly benefit from the archaic pay system known as the "uniform salary schedule." Good for Schwarzenegger for daring to tell it like it is.

And while Schwarzenegger's star appeal got him a ton of attention, let's not ignore the news out of Minnesota and Utah this week where governors also dipped their toes in the water. Time will tell if efforts to unseat the pay behemoth will prove successful. Unfortunately, Ohio, Idaho, Florida, Colorado and Iowa launched similar initiatives in recent years and their efforts fell far short. But our view remains optimistic, falling into the 'two steps forward and one step back' line of thinking.

However pressing is the need for reform, states need a heavy dose of realism about the resources required by these initiatives, especially if the existing salary structures are not challenged at the same time. Too many efforts by states have only been able to offer teachers a piddling increase; preserving the existing salary schedule in toto means that merit pay doesn't have much of a chance of making an impact. For example, raising a $35,000 salary by even five percent, equates to an extra $120 per month after taxes. At the end of the day, teachers are still making the choice between purchasing a new set of calculators for their class, catching up on the cell phone bill (which they ran up with calls to parents), or a hard-earned night out on the town. The amount is hardly enough to make a teacher think twice about moving on to more lucrative careers.

Given the political peril governors and other politicians may put themselves in when advocating this reform, it is critical that states proceed carefully, with an eye towards targeted experimentation and not wholesale reform. For instance, while student achievement gains should be the most important indicator of a teacher deserving of higher pay, standardized tests scores paint too narrow of a picture to be a sole indicator of a teacher's worth. Putting merit pay decisions in the hands of states or even school districts officials still will lead to excessively complicated formulas that suppress the potential benefits that merit pay could achieve. As always, efforts at real reform must come down to the school building level.

To our thinking, states or school districts ought first to run carefully designed experiments with merit pay, entrusted in the hands of good principals who have proven track records with their schools' performance. Give one group of these principals a fixed pot of money to newly staff a school—no more and no less money given to any other school in the district. Over a three- to five-year period, grant these principals the freedom to decide how to allocate their pot of money any way they see fit. The other group of principals would serve as the control group, and would have to work with the existing uniform salary schedule to staff its schools. At the end of the experiment, compare the two groups on such critical factors as student achievement gains and teacher retention and let the results speak for themselves.

Our guts, bolstered by the evidence from such pioneer efforts as the Milken TAP schools, tell us that this level of flexibility granted to principals would go a long way to reducing teacher attrition and stabilizing schools, both critical factors in addressing student achievement.