In 1996, Australia reached its high-water mark for public debt, hitting roughly $100 billion. Today, even in the midst of the global economic meltdown, Australia is virtually debt free and has a $100 billion "Fund for the Future." A funny thing happened on the way to this impressive turnaround. Australia realized it had a significant but unexploited potential: Redeploying its public assets.

California can today be similarly blessed. California's problem is not an excess of liabilities over assets. Rather, like Australia then, we are not extracting full value for those assets. Recently, the state considered the sale of individual "marquee assets," such as Sutter's Fort and the Los Angeles Coliseum. There is a better way to recapitalize California.

A bold new direction can address California's seemingly insurmountable financial challenges – one that creates a first-ever California public-private partnership enterprise fund. This fund would leverage every appropriate state asset that can generate a stream of income into one state-packaged public-private investment partnership – drawing upfront investment from around the world and significantly improving California's credit rating and financial standing.

This state investment fund would help put the state's assets to better use and on sounder financial footing. For example, state parks that would otherwise be closed would secure financing for improvements. Services like the Department of Motor Vehicles would receive funding for improved and more-efficient operations. These investments would increase the value of state assets, as well as reduce the state's ongoing costs up to 20 percent, which could save billions of dollars annually.

The capital raised – on a scale not seen before – would be used to reduce or eliminate future borrowing and pay down existing debt, helping to restore California's financial credibility and credit rating. Conservative estimates suggest this fund could raise tens of billions of dollars, allowing the state to pay off existing recovery bonds and even begin to build California's own "Fund for the Future."

The execution of the plan requires a mandate for an accountable and nonpartisan board to screen the investment options, structure them into viable, long-term investments and draw on California's ability to build international interest among investors.

The board would establish a public-private partnership enterprise fund – owned by both private investors and the state, which would redeploy our assets to their best use. The state would retain regulatory control and oversight of the assets through a regulatory oversight board, similar to the current approach in regulating private power utilities.

This effort would not require the selling of state assets outright or eliminate state control or ownership over them. Instead, the investment fund would deploy state assets in new ways, in collaboration with private investors interested in long-term stable returns. The benefit to investors would be a pool of public-private partnership investments that distribute risk and opportunity across a broader range of assets than they now have in their portfolio. The benefit to California would be the raising of billions of dollars in private investment to pay off its most expensive debt without relinquishing final control over its assets or selling them in a fire sale. In addition, this fund could support future private investments in significant infrastructure improvements throughout the state, creating jobs and building permanent assets, without additional public sector debt or taxpayer expense.

The timing may be just right. Sovereign and national wealth funds are flush with U.S. dollars. These countries rely on an "export-based" model and have a stake in restoring growth in the United States, and some funds have a particular interest in California. U.S. Treasuries are not providing them with a good inflation hedge, and they are actively – and not so quietly – seeking alternatives. Domestic investors, pension funds in particular, are equally concerned about finding new asset classes that provide reliable and stable returns.

There is plenty to draw on. California has approximately 33,000 state-owned properties or assets. Of that, analysts have estimated there is almost $200 billion in land assets alone. A significant number of these assets do not produce income but could with the appropriate financial partner.

By participating in building the future of California, investors, both domestic and foreign, would be sending a powerful signal of confidence in the Golden State. Also, capital asset investment creates local employment since such projects involve immobile assets, e.g. buildings, roads and bridges that cannot be outsourced or manufactured overseas. Further, to business owners, entrepreneurs and people skilled in high tech or biotech, for whom the entire world is now competing, the state would send a clear message that California is the place do business.

California is at a crossroads and its credit rating is the lowest in the nation. It faces an unprecedented drop in revenue, evidenced by the $26 billion budget deficit. Traditional tax increases and spending cuts, while perhaps inevitable in the short term, will not dig California out of its hole and may be counterproductive in the current economic environment. A California enterprise fund would provide a real opportunity to reset the state's financial profile and begin the process of rebuilding the state's future.

Bill Mundell is chairman of ZBB Energy Corp., an alternative-energy storage company, and chairman of Intekea, a Los Angeles-based economic development firm