Today's NYT has a good article about Michelle Rhee's efforts to revive DC's flagging school system. It focuses largely on her plan to phase out the tenure system. The quotation below sums up the intellectually honest reasons for tenure (in my view, the real reasons are far less noble):
Teachers first won tenure rights across much of the United States early in the 20th century as a safeguard against patronage firings in big cities and interference by narrow-minded school boards in small towns, said Jeffrey Mirel, a professor of history and education at the University of Michigan.
“And the historical rationale remains good,” Dr. Mirel said, pointing to the case of a renowned high school biology teacher in Kansas who was forced to retire nine years ago because he refused to teach creationism.
“Without tenure,” Dr. Mirel said, “teachers can still face arbitrary firing because of religious views, or simply because of the highly politicized nature of American society.”
These are important considerations. But they're not arguments for tenure. They're really arguments for greater first amendment protections for teachers and other public employees.
The SCOTUS has not been kind to public employees in this regard. Most recently, in Garcetti v. Ceballos (2006) (free summary here), the Court held that an employee could be fired for disparaging comments he made, largely because the subject matter of those comments was in the scope of his job description.
Public employees should be protected from arbitrary dismissal when they speak out on issues relating to their jobs. This is because the public has a right to know insiders' views with respect to the operations of the system (and the physical plants, and the cafeteria food, etc.).
Address the legitimate union concerns by granting greater first amendment protections against aribtrary firings. Create causes of action that will allow for damage awards when a teacher is fired, e.g., for refusing to teach Creationism in Kansas. But don't just make it automatic that a teacher can't get fired.
Rhee is right: schools need to be able to get rid of crappy teachers (and, much more importantly, to reward those who are good at their jobs). Merit pay is the only way to do this.