I think I can understand an institution turning away a gift. I work for a large non profit--not a school system--but I've been in that position and I can see many reasons for doing so.
We've turned away grants (in some cases $100+ million in sole-sourced grants) for a variety of reasons:
1) we were uncomfortable with the expecations of the donor (either because we felt their targets were unreasonable or because their expected methodologies unethical or simply untested to be used on such a large scale)
2) the size or scope of the grant would cause mission creep away from our core objectives
3) accepting the funds posed a large reputation risk--due to the nature of the donor, the high level of risks associated with the work they'd asked us to do or our own absorptive capacity.
I know that non profits and school districts are not the same thing. But both have a system of governance and funding that can be distorted by large grants from private individuals. In the case of a school district in particular--this allows private actors who may or may not have the expertise needed--to buy influence above and beyond that of the people of a city/state whose votes speak to how they would prefer their schools be run and their hard-earned tax dollars spent.
Whether this is the right decision is something I am ill equipped to judge, but I do believe there are plenty of reasonable reasons for a public institution or a non profit to turn away a large gift.