The majority of those ballots, 844,805, are mail-in ballots that came in too late to be counted on Election Day.
The results would determine the fate of Proposition 29, which would raise the cigarette tax a dollar a pack.
At first count, the Secretary of State's Office showed the measure trailing by 63,000 votes, but now the gap has narrowed to about 30,500.
Chris Lehman is Campaign Manager for Vote Yes on 29. He says the campaign remains hopeful.
Lehman: "We're rooting for more votes to be counted in places where we did well and we're hoping there are not a lot of votes in places we did poorly."
Lehman says more people voted in favor of Prop 29 in San Francisco County but the Central Valley rejected the cigarette tax by a margin of almost 2 to1.
Money raised by the tax would go to cancer research and smoking prevention programs.