For Maryland and Virginia, the challenge of dealing with a chronic shortage of technology workers begins at home.

But when it comes to filling their own tech worker pipeline, both states have a lot of work to do, a new report card on the Maryland economy concludes. Maryland and Virginia retained only about half of their science and engineering graduates in 1993, according to the National Science Foundation, data that were cited by the Maryland Technology Alliance in a recent report on the state's tech performance. Other East Coast states that are often ranked as competitors of Virginia and Maryland -- Massachusetts, New Jersey, Pennsylvania and North Carolina -- did considerably better.

On the other hand, the MTA analysis shows Maryland to be a more successful importer of science and engineering graduates than those other states, including Virginia.

Although the NSF data are old, the problem is current. Educators and officials in Maryland and Virginia recognize the need to retain more tech graduates because it is so hard for tech companies to recruit from outside their state.

In response, Maryland has created Science and Technology Scholarships offering $3,000 in annual grants to Maryland college students who keep at least a B average in an engineering or computer science major. They also must work for a tech company in the state for as many years as they have received the grants. Students who cannot meet the academic requirements, drop out of tech majors or leave Maryland before fulfilling their commitments must pay the money back with interest.

The program, begun this September, stumbled coming out of the gate. Maryland officials hoped to enlist 2,000 students this fall but only 784 have signed up, the Maryland Higher Education Commission reports.

Part of the low response may be due to a shot fired in August by Johns Hopkins University, which told students to steer clear of the program because of its 9.75 percent interest rate assessed on students who must repay their grants -- well above the rate on federally subsidized student loans.

Commission Assistant Secretary Tina Bjarekull said the interest rate is high because the program was designed for students who would meet its requirements, not drop out. But the commission will ask the General Assembly to lower the rate, she said.

Maryland officials believe the state's educational institutions should be magnets for future tech workers. Johns Hopkins is internationally known. The University of Maryland at College Park has highly ranked science and engineering departments. And a recent survey of 1,000 corporate recruiters by Computer World magazine ranked College Park's business school as one of the nation's best in preparing MBAs for tech careers.

So why must Maryland battle to hang on to its tech graduates? The author of the Maryland Technology Alliance Report, Marsha Shachtel, says one reason is the quality of Maryland's tech graduates, who are in great demand everywhere.

"On balance, it's a picture of the strengths of our institutions," she said.

"Now, if we could somehow convince more of our grads that there are exciting opportunities here, good for us," said Shachtel, senior fellow at the Johns Hopkins Institute for Policy Studies.

But how exciting are Maryland's opportunities for tech workers?

Taking its size into account, Maryland is among the leading states in creating business enterprises, says the Corporation for Enterprise Development. It attracts a growing share of technology investment, too.

But its tech sector is still heavily populated by federal contractors and slow-growing biotech firms. That's probably a turnoff for new grads who are drawn to hot technologies and dream of stock options at info-tech start-ups, Shachtel said.

"There's a strong orientation toward government work," she said. "It's the nature of who we are. We can't try to be something we're not. We can't make ourselves into Disney.

"Our challenge is to diversify our technology base," she added. "That means taking advantage of opportunities in telecommunications [and] e-commerce, and also building links between computer and biomedicine technologies.

"We have to build on our strengths and make sure the graduates know about it."

Brain Drain

The percentage of science and engineering graduates from in-state schools who stay and work in the state:

48% to 56%

Maryland

Virginia

57% to 66%

Pennsylvania

North Carolina

67% to 84%

New Jersey

Massachusetts

SOURCE: Maryland Department of Business and Economic Development; Southern Technology Council