WASHINGTONIANS WERE tickled earlier this year by surveys showing that not only is Seattle the "most literate city in the United States" (based on its number of bookstores, Internet book orders and other factors), but the city also has one of the highest proportions of educated citizens, with more than 35 percent of residents in the central Puget Sound area possessing bachelor's degrees. That beats the findings for any other U.S. metropolitan area, including well-educated San Francisco.

But should the state be so proud? After all, many of Washington's highly educated inhabitants were imported from either outside the region or outside the country. Furthermore, this state's ability to shepherd its own native sons and daughters through college has hardly been stellar.

"We're no higher than 36th in this country in production of these [college] degrees," fumes Bob Drewel, who heads Prosperity Partnership, a loose-knit organization of business, labor, government and community groups that is working on higher-education reform proposals. The proposals are to be delivered to the Washington Legislature in time for its 2007 session. "We're fighting complacency. People think that we can continue to do business as we always have and continue to prosper. I'm here to tell them that they're wrong."

Part of the problem is, as usual, financial. Washington ranks among the lowest in the nation when it comes to spending money to teach the young. Perhaps that partly explains why, this past spring, 46 percent of Washington's high-school sophomores, or about 33,000 students, failed to meet the math standards requirement on the Washington Assessment of Student Learning (WASL) test. Educators say the test is no more difficult than similar exams administered in other states.

At a time of economic uncertainty, declining real wages for most workers and fears of an approaching recession, lawmakers are leery of letting loose the purse strings.

"Education isn't high on the list" of legislative priorities, argues Bill McSherry, director of economic development for the Puget Sound Regional Council. "What it boils down to, essentially, is that education groups don't contribute to campaigns," adds state Rep. Don Cox (R-Cheney), who sits on the Washington Learns committee, an assemblage of business, community and political leaders put together by Gov. Christine Gregoire and charged with conducting a top-down, 18- month review of Washington's entire education system, its structure and funding.

Among states that are comparable to Washington on a range of economic metrics, Washington is in a next-to-last tie when it comes to the percentage of its ninth-graders who go on to finish high school. And it's dead last in the number of its students who enter college. According to Washington Learns, the Evergreen State tied for last in the percentage of ninth graders still enrolled by their sophomore year in college, and in the number of people who graduate from highereducation institutions within six years.

One of the consequences of these poor performances is that local companies are having a difficult time finding the highly skilled employees they need. When it comes time to fill such demanding jobs, particularly those in the science and engineering fields, business recruiters are often forced to go on the road.

The state's Office of Financial Management reports that between 1993 and 2004, there was a 12 percent drop-off statewide in the number of full-time students enrolled in engineering and related technology programs at four-year universities and colleges. Washington colleges now supply only 52 percent of the local demand for computer programmers. In a study by the Workforce Training and Education Coordinating Board, which advises the governor on workforce development policy, more than one-quarter of Washington employers say they're having a hard time finding applicants with training in technical areas.

Some of these mismatches between supply and demand can't be helped. Many employers, especially in the Puget Sound area, are demanding skills so specialized that candidates for the jobs are hard to locate anywhere in the nation. "It's difficult finding these people in the U.S., and we most certainly aren't finding them in the state of Washington," says Susan Specht, associate director for corporate communications at ZymoGenetics Inc., a Seattle-based biotechnology-pharmaceutical company. She notes, for instance, that her company is in dire need of biostatisticians and statistical programmers.

Amber Radcliffe, the operations chief at NanoString Technologies Inc., a company that's developing a nanotechnology-based platform for single molecule identification, holds an MBA from the University of Washington. Two other company employees also have UW Ph.D. degrees. However, Nano String's other scientists have all come from beyond the borders of Washington. "Mostly, we have to go outside the state to fill positions," she explains.

Diane Gary, head of human resources at Rosetta Inpharmatics LLC, a Merck & Co. Inc.-owned genomic research and data analysis firm, offers the same refrain. "In many disciplines, we don't have the candidate pool here," she says, pointing in particular to the disciplines of applied mathematics and statistics.

But it's not just high-tech enterprises that are feeling the staffing pinch. Even at Boeing, where employee demands are far less specialized, it's become hard to find qualified workers locally. "Boeing has helped develop and spawn vendors and suppliers, a good proportion of the workforce," says Rich Hartnett, director of global staffing for The Boeing Co. "But essentially, we've tapped that out. We're not able to find what we want here. We have the ability to attract people from different regions as a fact of our brand, but the process is getting longer and more difficult."

The slippage starts in the lower grades. John Warner, a former Boeing engineer who now serves on a number of governing boards (many of them linked to K-12 education) as well as the Washington Learns committee, refers to a "continuum" of failure and points out that public schools in this state, with few exceptions, are unable to graduate students with a firm grasp of even basic math skills.

Out of every 100 Washingtonians who start college in the state, only 16 make it all the way through in half a dozen years, according to the Manhattan Institute for Policy Research, a New York City-based think tank. About half the freshmen entering most of our state's colleges and technical schools require remedial math courses (though that's true of only 4 percent of incoming freshmen at the UW). And students who want to study in areas of high demand, such as nursing and bioengineering, are often unable to do so because those are higher-cost programs, and fewer students are accepted. Some of these students end up in liberal arts programs, which may not prepare them as well for today's workplace.

IT WASN'T ALWAYS THIS WAY

Washington wasn't always at the bottom of the list when it came to education. In 1983, it ranked at a high of 13th in per-student funding, says William Zumeta, a professor of education and public affairs at the UW and a contributor to the National Center for Public Policy and Higher Education 2004 National Report Card.

Back then, students were also staying in school longer. In the early 1990s, as many as 87.2 percent of students completed a bachelor's degree. Subsequently, though, the UW faced a sharp decline in funding. Between 1990 and 1997, the university's state subsidy dropped by nearly 20 percent. As a result, it plunged from 20th place to 42nd place. State appropriations now account for just 10 percent of the university's budget. In this era when expensive technology is becoming an increasingly necessary part of the educational experience, the university again finds itself coming up financially short.

The UW has dealt with the need to reduce budgets by surgically trimming frontline staff and equipment. It's also asked faculty to share computers and printers, and when they break down, machines aren't replaced as readily as they once were. In the past six years, the College of Arts and Sciences has lost 44 teaching and teaching assistant positions. Students have had to cope with significantly larger class sizes and fewer course offerings.

"The students don't do as well under this system," Zumeta maintains. He adds that with fewer course offerings, UW students now often have to stay in school a full extra year just to fulfill their curriculum requirements.

Business leaders worry about how these cost-cutting measures might affect students in the long run. "We need at least one successful research institution," says the Prosperity Partnership's Drewel. "The Research Triangle [in North Carolina], Silicon Valley - they have one or two strong research universities."

Thanks to its still-strong graduate program, the UW has been able, temporarily, to dodge the worst ramifications of its state funding squeeze. Donations have skyrocketed from $6 million in 1977-1978 to $311 million for 2002-2003. But with most of that money going to shore up aging structures and build needed classrooms, university officials wonder how long they can hang on with skeleton staff, obsolete equipment and whittled-down class offerings. In order to further offset costs, the UW has turned increasingly to new degree programs, mostly at the graduate level in professional fields - all part of an outreach service that is said to be self-sustaining. Right now, a full 20 percent of graduate students at the university are in fee-based degree programs, up from only a few 10 years ago.

Meanwhile, Washington's community and technical colleges have prospered (although their enrollment levels dropped 6 percent in 2003-2004 and another 1 percent last year). The state's funding stream per student at community and technical colleges has remained at the national average, even as it has declined at both the UW and Washington State University, in Pullman. "There's lots of community college capacity," remarks Zumeta. "They've been successful in maintaining their unusually large share of enrollment slots and associated funding."

But with half the students at two-year institutions requiring remedial math training and the number of people enrolling in their transfer programs to four-year institutions dropping a few percentage points, that sector, too, may be in need of an overhaul.

What all this means for the future can't be predicted with certainty. The state economy remains strong, but the unemployment rate is still among the highest in the nation. And there may be further hardships lurking in the statistic that says one in five students don't make it through high school in Washington. Studies show that people without a high-school diploma or a general education degree are more likely than others to land in prison or on welfare. The state budget for corrections more than doubled between 1991 and 2001, outpacing all other expenditures except for health care. The average cost per prisoner is $27,170 per year. That same money could cover a year's worth of education at the UW for two medical students.

Joanna Kadish is a journalist who lives in Mercer Island.