Good discussion, but you might be forgetting something ... productivity and long term impacts. What will the long term costs be of not doing a tech refresh? How are the departments likely to respond (e.g. buy their own computers) and what are the costs to the institution? Inaction will inevitably have a cost.

50% sounds like [s]he either pulled it out of their ass or like someone else mentioned - the financial situation is dire. Like most discussions, you want to frame the conversation in the best possible way for you to win it. In your case, I would work with your boss to re-frame the discussion around cutting the right part 50%. Moving all engineering related expenses to line of business accounts would be a good first step, then you can take a look at the real enterprise IT. Of what remains, consider what you can outsource within the limits allowed by applicable security and regulatory constraints. Of the IT enabling expenses in line of business accounts, consider what portion of those are O&M vs new expenditures. Can new expenditures be deferred without impacting productivity/revenue? Can you consolidate, outsource, or invest/buy-down continual obligations (it's amazing how many orgs won' consider that b/c they're too short sighted)? Ensure each of those areas is related to an overarching business strategy ... that's your justification for those areas. Make sure that the linkage includes a rough discussion about the revenue/productivity impact of each area both for new purchases/continual obligations for both the engineering and enterprise IT expenses. Obviously, you're not going to cut 50% of all IT spending and still have the full level of effectiveness and efficiency, not within a FY. Perhaps you should consider a more phased approach?