Silicon Valley: California's budget problems and its slipping education systems threaten the State's position as a high-tech powerhouse, according to a study.

Although California remains a hotbed of technological activity, its ability to attract academic research and development funds has declined in recent years, according to the report by Milken Institute, a California-based think tank, released yesterday (Mar 31, 2004).

But the institute warns that California has begun to lag behind other States in terms of nurturing entrepreneurs, attracting research and development investment and educating its young people, the 'Los Angeles Times' reported.

The new engine of regional economic prosperity is based upon how successful that location is in attracting and expanding science and technology assets and leveraging them for economic development, the study said.

Science, technology and knowledge-driven innovation are critical to job and wealth creation.

Massachusetts continues to lead on the "State Technology and Science Index", which measures the capacity of States to compete in the information age, with California nudging Colorado from its second place. The remaining of the top States are Maryland, Virginia, Washington, New Jersey, Minnesota, Utah and Connecticut.