TRENTON - New Jersey expanded a government health-insurance program yesterday to cover more low-income families and all children in the state.

The bill signed by Gov. Corzine is viewed as the first step toward ensuring all New Jerseyans have health insurance by 2011.

"This is a historic day for health care in New Jersey," Corzine said. "While there has been much national dialogue about universal health care, here in New Jersey we're actually doing something about it."

The bill, signed at the Raritan Bay Medical Center in Perth Amboy, mandates that children have insurance through the government or a private provider within a year.

It also expands NJ FamilyCare to more parents, raising the income limit for a family of four from $27,645 to $42,400. The program provides free or low-cost medical exams, shots, hospitalization, lab tests, X-rays, prescription drugs, and dental and mental-health services to 124,000 children and 97,000 adults.

About 1.5 million New Jerseyans, including 275,000 children, lack health insurance.

"New Jersey is taking a dramatic step forward in ensuring that quality health care is a fundamental right, not a privilege, for all state residents," said Sen. Joseph Vitale (D., Middlesex), the bill's sponsor.

The new $32.86 billion state budget includes $8 million to expand the program.

Some question whether the state has the ability and money for the program, noting that costs are soaring under Massachusetts' universal health plan.

In 2006, a Massachusetts legislative committee estimated the law would cost $725 million this fiscal year, but the state may have to spend $869 million, with many acknowledging costs will rise even higher.

Plans by New Jersey's largest insurer, Horizon Blue Cross Blue Shield, to possibly convert into a for-profit company could also bring the state billions of dollars for health care. The company would have to pay back state tax breaks it has received as a nonprofit, but supporters of the plan said they were not counting on that money.

Senate Minority Leader Tom Kean Jr. (R., Union) voted for the bill, but said the expanded program must be implemented properly.

"We've got to make sure the accountability measures are in place to prevent the kind of abuses we've seen," he said.