Reimbursement Systems: Texas and California

Along with the startup costs that colleges and employers incur when building new apprenticeships, any program will also involve smaller, recurring costs in the long term. Reimbursement systems, which cover a portion of instructional costs through regular budget processes, are one model for supporting these long-term apprenticeship program costs.

Three states that use reimbursement systems to subsidize the instructional costs of apprenticeship are Texas, California, and Wisconsin. The Texas Workforce Commission (TWC) has provided reimbursement funding under Chapter 133 of the state education code since 1996, while in California, a similar incentive called related and supplemental instruction (RSI), or Montoya funds, has been available since 1970. Wisconsin’s Apprenticeship Completion Award Program has existed since 2013 and provides a maximum reimbursement of $1,000 per apprentice, payable to the sponsor or the apprentice when the program’s classroom instruction is delivered through a technical college.

Historically, reimbursements in Texas and California have been based on a single contact hour rate. Contact hours, also known as clock hours, represent the amount of time a learner is physically present in a class or training setting.¹ Both states’ contact hour reimbursement rates are set through regular budget processes, with the total yearly funds allocated according to a schedule that allows training providers to anticipate available funding for the coming year.² Contact hour reimbursement rates are a convenient fit for traditional apprenticeships, as the recommended 144 hours of total RTI in a conventional Registered Apprenticeship are also counted in contact hours. To connect with college degrees, however, apprenticeship programs need to reckon with a different metric: the credit hour.

Credit hours, which are used to allocate federal student aid, represent a larger unit of class time, including time spent in class as well as time learners are expected to study on their own.³ A traditional apprenticeship program’s 144 total contact hours of classroom training only adds up to about nine credit hours if taken in credit-bearing courses—about three college classes. For an apprenticeship to include a college degree or even a shorter certificate, this is not enough. Existing degree apprenticeships, such as those provided by Aon and Siemens USA, include anywhere from 54 to 72 credit hours of class time—the equivalent of roughly 900 contact hours, plus outside study.

The disconnect between apprenticeship’s contact hours and higher education’s credit hours is more than a procedural inconvenience. Traditional apprenticeship providers do not typically provide such a large amount of classroom instruction, and they are not accredited to award degrees in any case. Colleges, on the other hand, can provide credit coursework, but often incur additional expenses to create and staff new courses if none exist that are suited to an apprenticeship program’s needs.

The necessity of delivering a large amount of credit-bearing coursework through a degree apprenticeship presents a unique challenge for contact hour reimbursement systems. In Texas’s Chapter 133 system, for example, an apprentice’s program may be reimbursed for up to 200 contact hours of coursework per year—enough to fully cover about 12 credit hours’ worth of class time. However, the $4.00 contact hour reimbursement rate for education providers under Chapter 133 provides colleges with less funding than they would receive under the base rate of Texas’s formula for funding credit coursework at its community colleges—$5.49 per contact hour—and also does not include the state’s performance-based Student Success Points funding. In California, the gap between the RSI contact hour reimbursement rate and the usual reimbursement formula is even greater: RSI is reimbursed at $6.26 per contact hour, while the credit hour funding rate equates to about $9 per contact hour.⁴

Reimbursement systems that draw on regular state appropriations can help to sustain long-term college participation in apprenticeship training.

Colleges are less likely to serve as effective partners in degree-connected apprenticeships if they receive less funding for an apprentice than they would for an ordinary student in credit coursework. To address this disincentive, both Texas and California have adapted state legislation and regulations to allow apprenticeship programs to make use of either contact hour or credit hour reimbursement rates.⁵ Though a sizable proportion of apprenticeship programs continue to benefit from contact hour reimbursements in both Texas and California—about 40 percent in Texas, and over 90 percent in California—these new credit hour options ensure that colleges do not lose out on funding when enrolling apprentices in degree-aligned coursework.

Though they do not provide any exceptional support to colleges just beginning to scale up their apprenticeship participation, reimbursement systems benefit from regular state appropriations and help to sustain long-term college participation in apprenticeship. In states like Texas and California with large apprentice populations, this type of reliable support is essential. As a program-focused strategy, moreover, reimbursement systems may also make it easier for employers to avoid shifting training costs to apprentices, as can occur if student-focused financial aid strategies are the only support available. Though programs in Texas and California are not prohibited by law from charging tuition or fees, most do not do so because they are able to count on their state’s reimbursement systems.