President Obama has announced the availability of more than $4 billion in discretionary funds to reform the nation's K-12 education system. These funds are part of what Secretary of Education Arne Duncan calls the "Race to the Top" and are part of the economic stimulus legislation enacted shortly after the president took office in January 2009. This legislation requires states to establish more charter schools and to eliminate barriers to tying teacher pay to student test scores, thus permitting performance pay for teachers. The legislation also requires states to demonstrate increased school achievement results for students and teachers and to specify how they will work with other states to develop common academic assessment systems. Even though there are several requirements for the Obama funding, the primary focus here is on merit or performance pay systems for public school teachers. What systems have been used to compensate public school teachers in the United States? Are merit or performance-based teacher pay systems an entirely new educational reform strategy? What is the rationale, research, or experience that supports the enactment of such systems? Will the implementation of merit or performance-based pay systems result in improved student academic performance? These questions are discussed in this article.