Check out this article from The Washington Post about how test-based incentives don't increase student performance.
The National Research Council recently conducted a report, which concludes that tests such as the High School Exit Exam, STAR testing, and others administered by the No Child Left Behind act do not in any way provide an accurate measure of student achievement. Policymakers and school administrators should heed this warning in designing programs meant to measure their students' success. Often students' test results will be used to evaulate teachers and principals in terms of their effectiveness in education - these methods are faulty, the report conducted by the NRC indicates.
Clearly, as the Obama adminisration has indicated and as this article also argues, standardized testing should be on its way out as a tool for measuring teacher and student success. Using standardized tests as the basis for school funding is a dangerous trap, one in which United States education policy has been caught for far too long.