Yes, this is truly poor taste. I would not just pay cash, possibly do cash and a present.
I would donate $10 to a charity for less fortunate children and give the girl a lesson in what it means to be in need at Christmas and year round - you may want to give the teacher a heads up that you'll be doing this though.
Our family rule this year is no gifts for adults, and something small for the little ones.
next door neighbor who watches our dogs, bakes us brownies and cookies, and takes my granddaughters to her house on the occassional weekend for "girly girl time".