I would generally consider spending to be profligate if you could not sustain it for a proportional reduction in population (even of an important demographic) with an equal proportional reduction in number of people served.

Or I guess the important matter would be making it so that you only have maybe a few quarters of loss before you can legally adjust services to fit within the budget.

It's really unusual for cities to shrink, let alone drastically, so rapping people on the knuckles for not planning what happens when half your population leaves is a bit disingenuous.

I don't think it's disingenuous to be thinking of how quickly you could terminate non-essential services and staff, and in what order they are cut. You can spend your size, you'd just better be able to downsize quick, whether the economic downturn is global or local, artificial or natural.

City councils seem to think they're in the business of employing people permanently, but they really shouldn't need to be concerned about that, given that the citizens are left to foot the bill, and the majority of them do not work for the local government.

Probably not, but the combination is especially dire.