Not only should the school money be frozen, but the teacher, administrators, and anyone else involved, should be locked up. It appears that if the source of the books is out of state, federal obscenity charges would apply. They might also apply just because the school receives federal money. Those who assisted in the procurement or distribution of the books would also be guilty, possibly even state and federal employees that proposed, advocated, or encouraged the distribution of the obscene material.
"Federal law prohibits the possession with intent to sell or distribute obscenity, to send, ship, or receive obscenity, to import obscenity, and to transport obscenity across state borders for purposes of distribution. It is also illegal to aid or abet in the commission of these crimes, and individuals who commit such acts are also punishable under federal obscenity laws.
The U.S. Supreme Court established the test that judges and juries use to determine whether matter is obscene. Any material that satisfies this three-pronged test may be found obscene:
-Whether the average person, applying contemporary adult community standards, finds that the matter, taken as a whole, appeals to prurient interests (i.e., an erotic, lascivious, abnormal, unhealthy, degrading, shameful, or morbid interest in nudity, sex, or excretion)
-Whether the average person, applying contemporary adult community standards, finds that the matter depicts or describes sexual conduct in a patently offensive way (i.e., ultimate sexual acts, normal or perverted, actual or simulated, masturbation, excretory functions, lewd exhibition of the genitals, or sado-masochistic sexual abuse)
-Whether a reasonable person finds that the matter, taken as a whole, lacks serious literary, artistic, political, or scientific value."
https://www.justice.gov/criminal-ceos/citizens-guide-us-federal-law-obscenity [Child Exploitation And Obscenity Laws]