This is the principle that only the persons legally injured by government conduct can sue to challenge its legality. The Ninth Circuit ruling effectively holds that states can challenge federal immigration policies on the ground that key state institutions are affected by the presence or absence of non-citizen students or faculty. That is unprecedented. It is like holding that a grocery store could challenge taxes imposed on its customers because they will have less money to spend at the store. The court did not seem to reflect on the broad implications of its ruling, but instead relied on technical readings of not-quite-analogous cases in different contexts.
The cases cited by the Ninth Circuit fall into two categories. One consists of cases in which the parties directly regulated by the law sue to block enforcement of the law against themselves on the ground that it violates the constitutional rights of others. Examples are the doctors in Roe, who would face criminal penalties if they performed an abortion and invoked the privacy rights of their patients, or the religious school in Pierce v. Society of Sisters, which was losing its accreditation and invoked the free exercise of religion by its students.
But in this case the State of Washington is not a regulated party. It is suing to block enforcement of the executive order against other people. The cases do not support any right of parties not themselves subject to a law to challenge a law based on the legal rights of others, even if they do business with those other people.
The second category consists of cases where the plaintiff has a special relation with the alien (spouse, for example) such that the plaintiff’s own constitutional rights are affected by the exclusion. The State has no special relationship with the affected aliens. True, in a narrow class of cases, states may sue parens patriae on behalf of their citizens, but aliens are not citizens of Washington.