Learn Hardcore Latin: Cum cives statuam spectarent, puer parvus sub ea ridebat. - While the citizens were looking at the statue, a little boy was laughing under it.

puer: nominative singular masculine
parvus: nominative singular masculine Together: a small boy / the little boy .

Here cum does not mean with (the preposition). It’s the conjunction cum meaning when / while / as introducing a time clause: Cum cives statuam spectarent = When/while the citizens were watching the statue...
Latin distinguishes them by grammar:

cum = conjunction + a verb (often subjunctive in past narrative)
cum = preposition + ablative noun/pronoun (cum amico = with a friend)

Why is spectarent in the subjunctive? I expected an indicative like spectabant.

In many narrative contexts, cum-clauses use the imperfect subjunctive to set the scene (often called a circumstantial or temporal cum clause). It gives background action: while they were watching.
spectabant could also mean they were watching, but cum + subjunctive is a very common Latin way to frame accompanying circumstances in past-time narration.

What tense is spectarent, and how do I translate it naturally?

spectarent is imperfect subjunctive active, 3rd person plural, from spectō / spectāre.
A natural translation is were watching or were looking at (as background action). Even though it’s subjunctive in Latin, English usually just uses a normal past progressive: