(Indianapolis, Ind.) - The State of Indiana has to pay IBM $52 million for terminating a contract with the company to overhaul the state's welfare system. 

IBM was hired in 2006 to improve Indiana’s welfare system through privatization. However, the system’s improvement worsened and in 2009 the state cancelled the $437 million contract.

IBM had been seeking $113 million for the cancelled contract. The state countersued to regain $150 million of the contract amount. In issuing the ruling Wednesday, Marion County Judge David Dreyer determined the state owed IBM $12.5 million for equipment, in addition to $40 million he had previously ordered the state to pay. 

Dreyer said neither side deserved to win and that taxpayers were the losers in the case. 

Daniels said Indiana had the nation’s worst welfare system eight years ago, and now has its most timely, accurate, cost effective, and fraud free system ever.

“That was always the goal, and changing vendors was essential to achieving it,” Daniels said.

Dreyer echoed those sentiments saying that IBM did law the groundwork for the system’s current success. Since the state began using different private vendors in early 2010, savings versus the old welfare delivery system have been $129 million, according to Indiana Family and Social Services Administration secretary Michael Gargano.

Even with the ruling, don't look for the governor to write the check anytime soon. 

“There will be an appeal and we frequently win those, so let’s see what happens,” Daniels said.

Meanwhile, Democrats say the botch welfare privatization should serve as a lesson.

“Not only are Hoosiers left footing the bill for Mitch Daniels’ ill-conceived privatization effort, but we cannot forget that his outsourcing scheme caused physical harm to vulnerable Indiana families. This proves that the Governor’s system was a failure, but money can’t repair the damage done to the neediest Hoosiers who couldn’t get the service they deserved from state government,” said Indiana Democrat Party Chairman Dan Parker.

State House Minority Leader Pat Bauer (D-South Bend) thinks the ruling gives Democrats fuel for the upcoming campaign season. 

“Privatizing poor relief? That’s the kind of issues we need to dwell on,” Bauer said.