The state fell from second to fourth place in a new ranking by the Milken Institute, mostly because of a lousy K-12 school system and the difficulty in attracting top-level graduate students from other parts of the country and world. Massachusetts was tops in the rankings, followed by Maryland (really???) and Colorado (huh???). As you might expect, California remains very solid on the entrepreneurial front - as well as in the availability of venture capital. It's also strong in business starts and patents for clean technology and nanotechnology (California received 48 percent of all venture capital placements in the U.S. in 2006). But Ross DeVol, the institute's director of regional economics, says "we are increasingly relying on existing strengths, such as the sheer number of industries and our model of capital funding, while other states are aggressively embracing new ways and new models." Not helping matters is the state’s huge budget deficit and the prospect of still more cuts in education. Here's the report. Below are the top 10 and bottom 10 states (lots of clinging to guns and religion at the end of the list).