No, they did not.
Unfortunately, Peanut bit an officer. As a precaution, the officer was given a rabies shot, and the poor squirrel was killed in order to test to see if it had rabies, since the only way to test for it is by killing the animal.
If that wasn't bad enough, the raccoon also had to be killed simply because it had been housed with the squirrel, thus if one had rabies the other one could very likely have had it as well.
If they simply quarantined the animals and waited to see if they developed full-blown rabies symptoms, it might be to alert and vaccinate any others that may have been in contact with them, including Peanut's owner.