Tell your staff what's happening to the IT budget and let them suggest cuts. Empower your staff. Ask your staff to identify and prioritize initiatives that will bring efficiencies. They know what works and what doesn't. Lead by example.
Economic conditions change quickly.
Make sure you're prepared to manage in good times and bad, and plan for both scenarios. Be circumspect with layoffs. If you cannot maintain payroll, be careful who you let go. Keep a core group of top players who will be ready to hit the ground running when things turn around. Focus on the core business.