Contract talks between the city and drivers for two private bus lines in Brooklyn and Queens broke down yesterday, in a battle that stands to strand 70,000 commuters for a second week and could cast a pall over the rosy picture of the city that Mayor Bloomberg painted during his State of the City address on Tuesday.

Two unions, American Transit Union Locals 1179 and 1181, want retroactive pay increases for the two years they have been working without a contract, and they’ve asked the city to help them keep their health insurance in force by paying their premiums before the private lines are merged with the Metropolitan Transit Authority. The city went partway: it offered to give the drivers a pay increase when the MTA takes over the lines and said it would pay their health premiums right away.

The union said that was not enough.

“They basically took the wage package off the table,” the treasurer of 1179, Tom DeMarinis, said in an interview with The New York Sun. “All we were asking for was a $1,000 lump sum and a 3% raise. Now they say it is linked to the transition to the MTA management. That transition may not happen for two years. We kept saying, ‘What if it doesn’t become part of the MTA on time?’ And they kept saying, ‘But it will.’ How do we know?”

The mayor expressed the view that it is the unions who are being difficult. “At this point, the city has done everything in its power to settle this dispute and get the buses rolling,” he told reporters in a hastily called press conference in City Hall’s Blue Room yesterday afternoon. “For reasons we don’t understand, the unions are not willing to send their employees back to work, and the people of Brooklyn and Queens are unfairly suffering for it.”

Mr. Bloomberg, too, could end up suffering for it. Already those who want his job in November, like the City Council speaker, Gifford Miller, are using the strike as a brickbat against the mayor.

“Squabbling with the unions does not help the 70,000 New Yorkers who rely on these buses every day,” Mr. Miller said. “The mayor’s job is to get everyone back to the bargaining table to stop this crisis.”

One of the issues on which Mr. Bloomberg is most vulnerable as he seeks re-election is his difficult relationship with some of the city’s biggest unions. The police, firefighters, and teachers unions have had a number of contentious exchanges with the mayor. All of them are working without contracts because, under state law, municipal unions are not allowed to strike if they provide a vital service to the city.

That has been the case since 1962, when workers for the Fifth Avenue Coach Lines went on strike. More than 1.5 million riders were stranded. It took Mayor Wagner and the Board of Estimate all of 24 hours to scrap the company’s franchises and take over the lines. Fifth Avenue Coach was never heard from again, and vital service unions have been barred from striking ever since.

“Clearly, not everything is rosy in Fun City,” a Baruch College professor of political science, Douglas Muzzio, said. “Certainly in Queens where those bus lines are extraordinarily important in work life and school life, this doesn’t do him any favors, and remember these are the outer-borough voters he needs to win re-election. The longer it lasts, the worse it is for him.”

The bus line discussions come at a delicate time. The city is trying to buy out the Green and Command bus lines – along with five other subsidized private services – so they can turn control over to the MTA. Mr. Bloomberg has told riders they will get better, more reliable service if the routes are run by the city. Drivers and other workers with Green and Command are worried about what the shift will mean for them.

They walked off the job Monday, saying they wanted raises, health-care benefits, and some kind of guarantee about job security once the MTA takes over. “For the first time there was a representative from the MTA there and they described the specifics of what the offer would be,” the city’s commissioner of labor relations, James Hanley, said. “It was the first time we were authorized to make that kind of offer. We told them we would guarantee it and we’d give it to them in writing.”

That wasn’t enough, the union said, because the workers don’t want to wait for a raise. While the two sides squabble, riders in Brooklyn and Queens are having to scramble to get around. For hire vans and livery cabs have been picking up passengers along the busiest routes that are cut off from other transportation options. That may be the case next week as well. Mr. Hanley and union representatives said there were no talks scheduled over the weekend.

“It is hard to say how much this will end up hurting Bloomberg,” Mr. Muzzio said. “Clearly the mayor has a number of labor negotiation problems, and the longer this stretches on, the more it looks like the inability to get a resolution with the other big unions may be his fault. This highlights those other problems.”