Edward Davis, an assistant professor of chemistry at the U.S. Naval Academy for the past three years, quit in June to take a higher-paying job as a researcher for a major chemical company -- the latest trickle in a brain drain that is beginning to alarm academy officials and members of Congress.

Davis and his wife Kathie, who have three young children, scraped by in pricey Annapolis on his $35,000-a-year salary. Troubled that his salary barely kept pace with the cost of living and bothered by what he termed inadequate support for research, Davis left to take a $43,200-a-year job with the Du Pont Co., the chemical manufacturing giant in Wilmington, Del.

"I looked at my career and said this won't do me any good," Davis said this week. "I decided the future would be better if I moved on."

For years, the Naval Academy, which produces the cream of the Navy's officers and technical experts, has managed to attract and keep top-level faculty with the allure of teaching at one of the nation's more prestigious institutions.

But a fast-expanding gulf between salaries paid by the academy and those of virtually every other major university in the country -- including Georgetown, the University of Maryland and the University of Virginia -- has seriously hurt the academy's ability to recruit civilian instructors and retain those currently employed.

"There's a growing disparity in the type of person we can attract here," said William B. Garrett, associate dean for administration. "When we advertise a position open now, we get a lot of responses, but when we tell them the salary we can offer, they say, 'Thank you, I'll look elsewhere.' "

Full professors at the academy receive an average annual salary of $43,200 -- compared with $52,800 at the University of Maryland, $59,000 at the University of Virginia, $60,900 at Georgetown, $59,800 at Johns Hopkins, $69,700 at Harvard and $55,900 at the University of Michigan, according to 1986-87 academic year figures compiled by the American Association of University Professors. The national average for all university and college professors was $45,530.

Faculty salaries at the Naval Academy are comparable to those at colleges and universities that lack substantial research programs, such as James Madison University in Virginia, Central Michigan University and the University of Minnesota-Duluth.

Moreover, under a federally imposed limit, the Naval Academy can't pay its top tenured professors more than $72,500 a year, a figure far below the top salaries and other financial benefits offered by Ivy League schools and prominent state-supported colleges and universities. About a dozen academy professors -- or roughly 2 percent of the faculty -- are bumping against this ceiling.

In the past, the academy had difficulty recruiting top-level engineers to teach because of stiff competition from other schools, but had virtually no problem filling other posts because of a glut of academics holding doctorates.

Today, the glut has evaporated and the academy must scramble to recruit top talent to teach economics, political science, history and foreign language.

Increasingly, the academy must settle for its second or third choice for a teaching post, according to Garrett, because the top candidate has taken a better paying job elsewhere.

"We're not at a crisis at this point," he said.

"But we don't want our standards of excellence to be compromised. Eventually, the quality of our instruction would suffer."

Rep. Tom McMillen (D-Md.), whose 4th Congressional District includes Annapolis and who is a member of the Naval Academy's Board of Visitors, recently introduced a bill to raise the $72,500 limit on faculty salaries to encourage senior faculty members to stay on. However, McMillen agrees with academy administrators that the more pressing need is to upgrade the entire pay scale for civilian instructors, which is pegged to the federal civil service pay schedule.

"It's just not a very promising future for anyone to stay at the academy or go there in the first place," McMillen said.

In a July 13 letter to Navy Secretary James H. Webb Jr., McMillen and eight other members of Maryland's congressional delegation, including Democratic Sens. Paul S. Sarbanes and Barbara A. Mikulski, urged Webb to exercise his legal authority to adjust faculty salaries to keep them competitive with those offered by private institutions. Webb, who was unavailable for comment this week, has promised to study the problem.

Cornelius P. Darcy, acting president of the Maryland Conference of the AAUP, warned recently that the shortage of highly qualified professors in science, engineering and a cluster of other fields "promises to become a full-scale crisis within 10 years."

"There is no end of magnificent buildings and state-of-the-art equipment at the academy," Darcy said.

"Let us hope that the powers that be at the academy soon realize . . . that if the faculty is to continue to be first-class there must be salary reform in the very near future."

The academy's 600-member faculty is equally divided among civilians and military instructors.

About 180 of the 300 civilians are tenured, 90 are competing for tenure, and 30 are temporary employes who stay for no more than two years.

Although no figures are available on civilian faculty turnover, Garrett said there has been a noticeable increase in recent years that he attributes to low salaries. Last year, three nontenured professors left the academy to take better-paying jobs, he said.

Since 1980, salaries for university faculty throughout the country have risen 42 percent, compared with a 19 percent increase at the academy, according to Garrett. "If those trends continue, we can see ourselves becoming less and less competitive," he said.

Tappey Jones, another former assistant professor of chemistry at the academy, said pay was less a factor in his decision to leave in 1985, after four years, than poor working conditions and his concern about the declining quality of education in his department.

Jones, now a senior staff fellow at the National Institutes of Health, said nontenured professors were expected to carry "beastly" teaching loads and do research, without the support staff that is provided at other major universities and institutions.

Despite its problems in recruiting and retaining good faculty, the academy continues to enjoy a strong academic reputation and attracts top-level students.

This year, the academy accepted only 1,595 of the 15,565 men and women who applied for admission. Most of those accepted were in the top 20 percent of their high school classes.

But McMillen fears the academy is headed toward a teaching crisis unless the salary problem is dealt with soon. In January, the faculty received a 3 percent salary increase as part of a general pay increase among federal workers. McMillen said conditions could be greatly improved if the Navy approves a 15 percent pay raise over the next three years -- a proposal first floated last year by the academy's academic dean.

"There's a lot of attraction to teach at the academy and prestige, but that just goes so far in paying the bills," McMillen said.