This time around California is the one that needs to take notes and Maryland is the one to watch. That’s according to the Milken Institute’s State Technology and Science Index released June 2008.

The Santa Monica, CA based organization shows a not so sunny side to the often hailed technology industry in California.

In the overall report, out of a total of 100 points, Maryland placed a respectable second (80.04), narrowly behind Massachusetts(82.61) but ahead of number four ranked California (74.62). Maryland and California switched places from the previous 2004 report. Colorado held onto its’ 3rd place position (78.32) while Washington moved up to 5th place (72.09).

Virginia placed 6th in the ranking (70.33), actually dropping from the 5th place spot it held in the 2004 report and a difference of almost ten points with its’ northern neighbor Maryland.

Finishing out the top ten are a close position for Connecticut (70.18), Utah (69.21), New Hampshire (67.90) and Rhode Island (66.69).

A press release for the 2008 report states that California “shows signs of faltering in its efforts to capture federal funding and build its future work force.” The latter is especially concerning because Human Capital Investment holds considerable weight in a knowledge based economy, a value measured greater than capital equipment and capital itself the institute affirms.

Furthermore part of the problem in California is the fact that it lacks a highly skilled workforce as a relatively high percentage of it’s’ population, particularly a workforce holding at least a bachelors degree. And the future doesn’t look bright as a low skilled labor force inundates a state without a plan to mitigate the problem.

While Maryland ranked #1 in the Human Capital Investment Composite Index, California did not make the top ten. Maryland’s #1 rank was partly attributed to “the state’s performance in percentage of bachelor’s degrees granted in science and engineering as well as the magnitude of change in state appropriations for higher education”.

But one major weak spot for Maryland is the category of Risk Capital and Entrepreneurial Infrastructure in which venture capital falls under, an advantage of places like Silicon Valle.

California placed number one in this category while Maryland ranked 6th. California has cultured the private sector to invest substantial amounts in state businesses, bring academic patent activity to the market.

Several reports show that the Mid-Atlantic region, which encompasses Maryland, Virginia and Washington, D.C., falls to the bottom of the pack when it comes to total venture capital investments.

On the flip side the other part to this category is entrepreneurial infrastructure, the report showed that California could improve in this category. On this front it is well known by locals that Maryland has invested a substantial amount of government funds into creating a statewide business incubator network with an emphasis on biotechnology companies. The state already has 20 incubators with a least 4 underway.

With a lower rank the study points to Maryland’s need to improve its staid and dry entrepreneurial atmosphere to one that’s vibrant able to stand on its own and less dependent on government subsidies.

Maryland would gain a lot by learning to leverage its’ assets to offset the relatively high cost of living and doing business.

The Milken Institute’s 2008 State Technology and Science Index looked a 77 indicators divided into five major categories; Research and Development Inputs, Risk Capital and Entrepreneurial Infrastructure, Human Capital Investment, Technology and Science Work Force, and Technology Concentration and Dynamism.

The nonprofit think tank calls the study “one of the most comprehensive examinations of state technology and science assets ever compiled.”