CRANSTON, R.I. (AP) – The state’s failure to produce more skilled workers has left it facing a future of stagnating incomes and a sluggish economy, according to a report by a panel of government, business and education leaders.

The study by the Rhode Island Economic Policy Council says the state’s average education level is decreasing at the same time employers are demanding more skilled workers. The gap could force employers to speed up the international outsourcing of jobs, increasing the state’s unemployment, the report says.

“Large numbers of Rhode Island adult job seekers and incumbent workers lack the skills to fill vacancies in high-demand occupations,” the study says. “Rhode Island’s economy and work force are moving in opposite directions.”

Rhode Island has 1 million residents, but 142,000 adults lack a high school diploma and 35,500 have limited English language skills, according to the report, released Friday.

By 2020, the percentage of the state work force without a high school diploma is expected to increase and the percentage of college graduates is expected to drop, according to data from the National Center For Public Policy and Higher Education that was included in yesterday’s report.

That will leave Rhode Island struggling to provide workers even for remaining manufacturing jobs, which are requiring greater technical skills.

“Our education system chronically under-supplies workers with higher education and over-supplies workers with little education,” the report says. “Yet all sectors of the economy, even sectors such as retail and personal services increasingly demand front-line workers with the skills to add value to the customer experience.”

Among the report’s policy recommendations are steep increases in spending on adult education.

Rhode Island spent about $4.3 million on adult education in the 2005 fiscal year. The council has called for that to jump to $19 million by 2010, Christopher L. Bergstrom, the council’s executive director, told The Providence Journal.

The report praises efforts to institute a statewide science curriculum, but Bergstrom said major changes are still needed to prepare Rhode Island students for the so-called innovation economy.

“The skills to innovate are skills the K-to-12 system was never designed to produce,” he said. “It was designed to produce the work force for an industrial economy.”

AP-ES-06-02-07 1317EDT