I really dont see anyway that it should be linked to a teacher's pay. As it is, the Principal observes your classes as many times a year as they please, and its mandatory I think at least 4 times in order to renew your contract. At the schools I taught at, 2 of the 4 visits were spontaneous and you have no idea they are coming so you cant plan ahead!
Like the other person posted on this thread, too many variables affect those test scores. If its based on state proficiency tests, those are given just once a year so you couldnt even look for improvement as a criterea.
Believe me, the principal knows who the good and bad teachers are. IN this economy they dont have to hang onto bad teachers out of fear of not finding a new one because there is a line around the block of eager young teachers frothing at the bit to get into the classroom. The young guns just getting out of college are willing to go through just about anything to get a job, so even if its not a nice school district the jobs fill fast. Even the inner city here has no jobs. If the administration wants to get rid of you, they will find a way.