So I was just going to make a snarky drive-by comment on the dwindling popularity of merit pay as states face huge deficits (due in no small part to the bad bets of a few madmen in New York), and then get on with enjoying my Fair Day by writing curriculum and maybe playing pirate video games. But I'm having trouble moving on. So, for what it's worth, a few more thoughts.
There is no way this looks good for the reformers who pushed it. At best, it was a bad bet on a motivating system that all available research suggested wouldn't have the stated desired effect. A generous interpretation says that reformers* genuinely believed that merit pay would have an increased effect on teacher efficacy, and that their position is being undercut by current circumstances. In this picture, as soon as the financial situation of the various states (and Washington, D.C.) improve, the merit pay will be back up and running, barring further research that says it won't work.
At worst, this indicates that the political proponents of merit pay aren't even willing to fund their own educational priorities. That means that anything even remotely controversial or expensive, like mandatory universal pre-kindergarten education or 10.5-month school years, are all pretty much DOA. Forget about expanding the Kalamazoo Promise country-wide. They're not going to pay for what they believe in; they certainly aren't going to pay for anything else. So they hope education reform will happen by itself, for free, or perhaps paid for by the Gates Foundation.
Because of the flavor of the political nature of corporatist education reformers, I suspect it was just a bait-and-switch for teacher pay and benefits. "We can't afford to pay you a starting salary of $30,000, so how about $25,000? But if you work hard, you can earn merit pay up to $32,000! No, wait, we can't afford to pay your merit pay. But your contract says that you're okay with a base salary $25,000. So that's what we're going to go with that. Okay? Okay."
Alright. Now I'm done. I think.
*"Reformers" is a hard word for me. I'm an education reformer; I'm reforming education by continually trying to be a better teacher. I wish the system were more supportive of those changes. The word in this context means "people who have no particular expertise in education but want to rearrange the system anyway." All of their ideas aren't bad, but merit pay is.