There are several possible answers.
1. The teacher may have injured her voice.
Many people are motivated to become better teachers when looking for answers as they recover from setbacks. Sometimes the teacher’s voice may come back to full function, and even improve from its former high point; sometimes it may not, but the quest for answers often makes her a better teacher.
2. The teacher may have simply stopped studying and/or practicing.
It is my belief that teachers should continue to study, practice, and get outside feedback throughout their teaching careers, but some do not. I attended a summer program a long time ago where I had several productive lessons with a well-known voice teacher whose own singing was quite strange. I think he could have gotten his act together again, but he didn’t seem to be hearing himself right. Perhaps over the years he needed to make technical adjustments to the way he learned to sing that never happened, or maybe there was some history there that we will never know. However, he had very sharp ears and a seemingly excellent grasp of vocal function in others, and helped several of us to make some breakthroughs in a relatively short time.
3. The teacher’s knowledge and teaching ability may have grown past those of his own teachers.
Sometimes a teacher comes along who is incredibly effective with many students, but who herself never had the quality of teaching she can now offer. She may have missed a window of opportunity in her early years to build her voice to the degree that she might have with better teachers. Studying pedagogy, function, science, anatomy, health, and technique from many angles may allow a synthesis that leads to outstanding teaching in one person, and that person may actually become a better teacher than the people who taught her how to sing. In other words, the singing level stays in one place (which may be just fine, or maybe not so fine) while the teaching level continues to grow throughout her career.
It is easy for a singer (whether a student, a high-level pro, or a teacher) to go astray as time passes, bodies change, and habits come and go. It is useful for a teacher to keep working on her own voice, both for her own satisfaction and to serve as a good model for students.
Generally, it would be nice if all “artist faculty” were great teachers, and it would be nice if all voice teachers were great singers, but that isn’t reality. A prospective student should be careful of making assumptions until they have actually witnessed the teaching and/or results of a particular studio.