One of the great issues in the debate over the relative compensation of public employees versus private sector employees is the value of public employee pensions. Most (all?) public employee pensions are defined benefit plans and while public employees are underpaid in terms of salary their pensions are seen as unusually generous. Kevin Drum has a good post up discussing the issue with a writer from the American Enterprise Institute that is, I think, well worth reading.
The only thing that I would add is that public employee pensions are generally not pensions received in addition to Social Security, like private sector pensions are. Public employees in many states have opted out of the Social Security system so their pension plan is the only retirement funds they receive - not gravy on top of their Social Security benefits. This is an important fact that is very rarely ever mentioned in these debates.