Eleven per cent of Maryland's high school juniors have failed to pass a minimum competency test in reading that measured such skills as the ability to look up information in an encyclopedia and understand job and credit card applications.

The State Board of Education announced yesterday, however, that the failure rate was a 2 percent improvement over 1976 when 13 percent of the state's 11th graders failed the test.

The state board is expected to act this summer to make minumum reading competency a prerequisite for high school graduation effective with the class of 1982.

In the Washington area, Montgomery County, with a pass rate of 95 percent, scored highest, as it has since Maryland started giving the tests three years ago.

But Queen Anne's County on the Eastern Shore edged Montgomery out for first place in statewide rankings with a pass rate of 96.5 per cent.

Prince George's County reported a failure rate of 14 percent - slightly above the average, but the same level achieved by Prince George's 11th graders in 1976.

In Howard, Charles and Batimore counties, the 11th graders finished just behind those in Montgomery with a pass rate of 94 percent. Anne Arundel County had a pass rate of 93 percent.

"We're gratified by the slow but modest gains," said Gus Crenson, a spokesman for the state Board of Education. "Of course, we would have expected some of the gains, inasmuch as the test has been given for three years and the teachers have curriculum guides."

The tests, which are called functional reading tests, were first given in 1975 to seventh and 11th graders in response to legislature's directive that schools be held more accountable to the public.

They are designed to test minimum survival skills necessary for an adult to function as a competent member of society. As such they differ from standardized tests that rank students against their peers on a scale of one to 100.

The functional tests measure such skills as the ability to follow directions, acquire information form a newspaper, or understand training manuals.

To pass, a student must answer at least 80 percent of the questions correctly.

As currently envisioned, students entering the ninth grade next fall will be given the test. If they pass they will be considered to have met the minimum requirement for high school graduation and will not have to take the test again.

Those who fail will have a chance to take the test in the 10th, 11th and 12th grades, but will not be allowed to graduate without passing it.

Of the ninth graders who took the test last fall, 26 percent failed and 28 percent of the seventh graders tested failed. Last fall was the first time ninth graders were tested, but seventh graders have been included in the tests since they began in 1975.

Statewide, the seventh graders registered a gain if three percentage points over 1976 in the past rate on the test.

At the seventh grade level, Montgomery and Howard counties had the highest pass rate in the state, with 87 percent of their students passing the test. In Prince George's County 70 percent of the seventh graders passed the test in 1976.

At the ninth grade level, Montgomery also led the state with a pass rate of 89 percent while Prince George's with a pass rate of 72 percent, was slightly below the state average.

In Montomery, in grades seven and nine, the scores showed steady improvement since the tests were first given.