Are state National Guards allowed to write rules/regulations that contradict DOD regulations?

It sounds like your state command hadn't published anything but simply "told" you that it is their policy not to pay.
Usually the easiest way to resolve these issues is to request to see the offending policy in writing and then producing the policy/regulation of the higher echelon (in this case the DOD). Most of the time, there is absolutely no policy and either a. "heard" that's how it was done or b. a commander at some point made a remark without knowing the regulations that became an unwritten rule.

SFC (Join to see) - To simply put it, SFC, no they cannot write policy that supersede a regulation by higher echelon. They can only make it more restrictive. Basically, they can add to, but not take away.

If the DoD says that they will be reimbursed, even if they don't have a GTC, the unit can't say we're going to reimburse you unless you have a GTC. However, they can say, we will not send you to training/schools if you don't have a GTC.

If I'm reading the comments properly, I would definitely look into involving the IG. I would also be prepared to take beyond your BN, or BDE, level, if need be.

Is there enough time for him to get a GTC? If not, and I were him, I'd say "if I'm not getting reimbursed, I'm not spending the money, therefore I'm not traveling". Seriously. This is pure, unadulterated bullshit.