Can you name what separation of power is being overstepped here? I'd like to know the argument in order to respond.
Of my own recollection, if the federal government is granting refugees a legal status, even temporarily, then the comity clause should prevent states from imposing any sort of regulation on it. There's no real right of states put into the constitution to allow them to regulate their own borders or define state citizenship.
I believe the question being raised by the 26 states involved, including Texas, is whether or not the President has unilateral authority to grant lawful status to over 4 million unauthorized aliens via the Deferred Action for Parents of Americans and Lawful Permanent Residents, initiatives that Texas litigators have successfully argued would bring "financial injury" to the state because it would require the states to issue driver's licenses to DAPA and DACA recipients "at a loss." In the 5th Circuit's ruling, the court found that Congress gave the president
no authority to deem some immigrants "lawfully present" on a temporary basis under current immigration law. So the way things stand at the moment, the President's wishes vis-a-vis DAPA / DACA are being blocked, with Congress recognized as the source of immigration law (which is the separation of powers I alluded to in the initial post).