The ballots from the Democratic stronghold of King County could put Democrat Christine Gregoire over the top.

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OLYMPIA — The state Supreme Court today unanimously overturned a lower court order that had stopped King County from counting 735 disputed ballots cast in the closest governor’s race in state history.

The court, siding with Democrats, King County and Secretary of State Sam Reed, said that state law gives counties the power to reconsider ballots mistakenly rejected in earlier counts if there is evidence of an error.

The win for Democrats come as their candidate, Attorney General Christine Gregoire, appears to have taken the lead in her race with Republican Dino Rossi.

King County, the last to complete the recount, is not expected to release new vote totals until this afternoon. But state Democratic Party Chairman Paul Berendt said last night the party’s calculations indicate that, with virtually all of the votes tallied, Gregoire is ahead by eight votes.

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“Based on the data we’ve received, we’re confident she’s taken the lead,” Berendt said.

Republicans said they were still crunching King County’s figures and weren’t sure who was ahead. But they confirmed the margin is likely fewer than a dozen votes.

Before the Supreme Court today Republicans argued that the King County Canvassing Board has already acted on the ballots and that state law prohibited the county from reconsidering those decisions.

But the court said Republicans read the law too narrowly. The court took a broader approach, saying that because the ballots were mistakenly categorized as having mismatched signatures, they were not “fully canvassed.”

Prior court decisions show that that “is just the sort of apparent discrepancy or inconsistency that the board can correct,” the court wrote.

The court also addressed Republican concerns that the security of the questioned ballots had been compromised, saying while Republicans “suggest that there may have been some impropriety involved in this decision, or that the ballots involved might have been tampered with, but point to no facts supporting such a conclusion.”

“We’re thrilled,” said state Democratic Party spokeswoman Kirstin Brost. “All along, this has been about counting every vote.”

State Republican Party Chairman Chris Vance said he had “nothing to say.”

Yesterday, however, Vance said if King County is allowed to count the disputed ballots, Republicans would fight to bring back hundreds of Rossi votes that he contends were wrongly rejected in other counties.

The decision was released just hours after the court heard oral arguments in the case.

After King County’s canvassing board voted 2-1 last week to prepare the ballots for counting, Republicans sued. On Friday, Pierce County Superior Court Judge Stephanie Arend ordered King County to stop preparing the ballots.

Arend said she was relying on a Supreme Court decision from earlier this month that unanimously rejected Democrats’ call for all counties to be ordered to reconsider thousands of previously rejected ballots.

The Supreme Court cleared up any confusion — and there has been some — about that earlier order by saying today, “Our prior opinion did not hold that the recanvassing statute may not be employed by canvassing boards during a recount.”

County election officials discovered the errors midway through the manual recount when Democratic King County Councilman Larry Phillips found his name on a list of rejected ballots.

The ballots had been disqualified because those voters’ signatures were not found in the county’s electronic voter-registration files and election workers did not follow guidelines to search for a match in voter registration files.

Before the Supreme Court this morning, Republican attorney Harry Korrell said King County was trying to “add votes to the universe” of what could be counted late in the recount.

“It would be fundamentally unfair … to allow one county — because the county got a call from a county councilman who was angry that his vote didn’t get counted — to go back and revisit a bunch of decisions when all of the other counties in the state have understood these provisions to prohibit recanvassing,” he said.

Thomas Ahearne, an attorney representing the Secretary of State, said voters should not be punished because of King County’s errors.

“Nobody is proud of the fact that mistakes have been made in the original count and the machine recount,” he told the court. “Nobody’s proud of the mistakes King County election officials have made. But we should all be proud that we have a system that allows those mistakes to be corrected.”

As of yesterday, King County election officials said they had tracked down voter registration signatures for 595 of the people whose ballots were rejected. They were still trying to track down records for the rest.

County elections director Dean Logan said that verifying the signatures and counting the valid ballots should take no more than a day.

The court lifted a temporary restraining order issued by Arend and sent the case back to her to be dismissed.

Rossi won the initial count by 261 votes, out of nearly 3 million ballots cast. After his lead fell to just 42 votes after the first recount, Gregoire refused to concede and Democrats called for the statewide manual count.

Vance said yesterday the Republicans know of about 500 people statewide — including more than 260 who have signed affidavits — who say they voted for Rossi but their ballots were rejected because of signature mismatches or other problems.

The party said yesterday it has heard from several members of the military, including some serving in Iraq, who say they wanted to vote but did not receive ballots in time.

Vance has said the party will fight to get all of those votes counted .

“If they can bring in theirs from King County, we’ll be going back to every county auditor and saying ‘Let’s start it all over again,’ ” Vance said.

“Yippee! My poor little orphaned ballot at Christmastime finally found a home. The Republicans will say bah humbug, but the rest of us will rejoice,” said County Council Chairman Phillips.

“I’m very thankful, but I’m quite surprised,” Phillips said. “I wasn’t sure the Supreme Court was going to do the right thing.”

Phillips, a Democrat from Seattle’s Magnolia district, said he had “lost a lot of faith in our judiciary” as a result of the U.S. Supreme Court’s 2000 decision on the counting of ballots in Florida in the presidential race between George Bush and Al Gore. “More and more decisions are being made on what I consider to be a political basis. This restores some of my faith.”

Phillips normally votes at the polls but voted absentee this year before he traveled to Ohio to campaign for Democratic presidential candidate John Kerry. He maintained his vote should be counted because he properly submitted his ballot, which was rejected when county workers misfiled it after failing to find his signature in the election computer system.